In the past, the development of information systems (IS) for companies was mostly driven by experts from the information technology (IT) department. Up to today, the users’ experiences, valuation of usability and suggestions for improvements have become important components in the research and development (R&D) process in order to ensure efficiency, usability and sustainability of the IS. Many newly developed IS components do not fail in terms of usability and effectiveness due to a lack of advanced technology, but because of failure to understand the users’ needs. Living Labs - open innovation environments - offer a unique opportunity for IT departments to involve users at each stage of the R&D process.The objective of this paper is to provide a conceptual framework for discussing the question to what extent the Living Lab methodology is able to overcome problems concerning the diffusion of IT. Therefore, major challenges will be deduced from factors that influence IT adoption: characteristics of the technological innovation, communication channels and social context. Afterwards, potentials of Living Labs for the diffusion of IT, i.e. to what extent this methodology is able to meet the major challenges, will be analyzed.