Abstract Background Sustainable rural development entails efforts to enhance the well-being of rural communities while safeguarding natural resources for future generations. The thorough examination of sustainable rural development is still scarce but nevertheless crucial, as it enables to reveal the various challenges and remaining potentials in rural areas, to identify key stakeholders and their respective roles in promoting sustainable rural development, and to determine the best practices for attaining set goals along the various sustainability dimensions considered. Germany has implemented a range of policies, initiatives, and programs to foster sustainable development, extending its efforts to also encompass rural areas. This study assesses the sustainability performance of rural municipalities in Germany, proposing a novel and comprehensive sustainability benchmarking system. For this purpose, the performance of selected rural municipalities along the ecological, social, economic, and technological dimensions is examined. Results Based on the systematic implementation of methodological stages, a rigorous literature review process, a systematic indicator selection, and stringent filtering criteria, the selected indicators of our study cover environmental, energy, quality of life, economic, and technological aspects. These indicators enable to efficiently and effectively measure, compare, and evaluate the sustainability performance of rural municipalities. After normalization, weighting, and aggregation of the considered indicators, the performance is visualized in radar charts. Radar charts are handy for comparing a larger number of variables and displaying them in compact and comprehensible form in a single chart. Finally, the overall relative sustainability performance of the selected rural municipalities in Germany is compared based on an aggregated single score. The adopted methodology of aggregating indicators enables us to assess the sustainability performance of municipalities as well as to highlight variations among them. Conclusion Most databases and sustainable development reports are updated only every couple of years and often do not report the performance of small rural municipalities but only larger (more urban) ones. By conducting a detailed analysis of these specific cases, we can identify key challenges and opportunities unique to rural communities and develop targeted strategies for a more sustainable development. Adding digitalization as a technological value indicator makes our approach more comprehensive than comparable others, and accounts for the important new sustainability dimension of societal transition. This study contributes to the existing literature by proposing a novel sustainability benchmarking system specifically tailored for rural areas. From a practical standpoint, the developed sustainability benchmarking system offers a practical tool for rural municipalities to assess and monitor their sustainability performance and to reflect on variations among them. The identified dimensions and indicators can guide the development of targeted strategies and interventions aimed at enhancing sustainability in rural communities. Finally, policymakers can utilize the benchmarking results to design policies, (incentive) programs, and initiatives that address the specific sustainability challenges faced by rural municipalities and account for limitations in the local potentials.