Purpose: The wider use of Internet of Things (IoT) makes it possible to create smart cities. The purpose of this paper is to identify key IoT challenges and understand the relationship between these challenges to support the development of smart cities. Design/methodology/approach: Challenges were identified using literature review, and prioritised and elaborated by experts. The contextual interactions between the identified challenges and their importance were determined using Interpretive Structural Modelling (ISM). To interrelate the identified challenges and promote IoT in the context of smart cities, the dynamics of interactions of these challenges were analysed using an integrated Matrice d’Impacts Croisés Multiplication Appliqués à un Classement (MICMAC)-ISM approach. MICMAC is a structured approach to categorise variables according to their driving power and dependence. Findings: Security and privacy, business models, data quality, scalability, complexity and governance were found to have strong driving power and so are key challenges to be addressed in sustainable cities projects. The main driving challenges are complexity and lack of IoT governance. IoT adoption and implementation should therefore focus on breaking down complexity in manageable parts, supported by a governance structure. Practical implications: This research can help smart city developers in addressing challenges in a phase-wise approach by first ensuring solid foundations and thereafter developing other aspects. Originality/value: A contribution originates from the integrated MICMAC-ISM approach. ISM is a technique used to identify contextual relationships among definite elements, whereas MICMAC facilitates the classification of challenges based on their driving and dependence power. The other contribution originates from creating an overview of challenges and theorising the contextual relationships and dependencies among the challenges.