The development of medical clusters is high on the agenda of many policymakers in the European Union. Constructing medical clusters may draw on the presence of living labs of different kinds in the regions involved. Living labs are practical environments for innovation aiming at a better mix and match between stakeholders for co-development and reduction of time-to-market through an early involvement of user groups. Living lab settings range from delimited environments for co-creation and development, like a city quarter, a hospital, creative workshop or university campus, to local and regional networks and platforms of open innovation. Participants in living labs are typically universities, research institutes, user groups, small and large firms, non-profit institutions (like most public hospitals) and local/regional authorities. Accordingly, living labs find themselves in a dynamic multi-actor situation that needs to be dealt with, both in their design and management. The focus of this paper is on living labs for health care innovation and on potentials for cluster development. Health care is under pressure as a consequence of the aging population, and fast increasing population with chronic conditions and shortage of resources. The paper identifies critical factors in the design of medical living labs and speculates on the role of living labs in the construction of clusters based on a single case study.