The city was ranked fifth in a report looking at all 69 cities, trumping the likes of London, Manchester, Liverpool, Birmingham and Edinburgh.
The research analysed the cost of commercial property, energy, virtual office services, public transport, broadband service, workforce demographics, access to finance and quality of life.
Researchers also looked at the availability of good office space and broadband speeds, then marked their findings out of 10 to draw up the national league table.
The report was put together by London-based Quality Formations, which helps entrepreneurs to start up companies.
Sunderland achieved its high ranking largely due to its affordability compared to other more expensive cities.
The city’s position was further strengthened by its excellent broadband speeds, which average 22mbps and are among the fastest in the UK.
This has played a huge role in attracting a number of leading technology firms to Sunderland, turning the city into a major digital hub.
James Howell, compliance executive at Quality Formations, said: “Sunderland is a city with a lot going for it.
“In recent years, it’s emerged as the North East’s definitive answer to Silicon Valley – with more than 220 software companies raking in some £65m every year like clockwork.
“Working closely with the region’s five universities, tech start-ups are now flocking to Sunderland in order to take advantage of the city’s new, co-working environment – and with good reason.
“Between the council’s Evolve business centre, the University of Sunderland’s Software Hatchery and the gleaming North East Business & Innovation Centre, Sunderland provides new tech companies with an unparalleled level of support and low-cost facilities.”
Cllr Paul Watson, leader of Sunderland City Council, added: “We’re delighted to be named as the UK’s fifth best city to start a business in the Quality Formations report.
“There is a vibrancy about Sunderland, a sense that opportunities are there to be taken and a real feeling that people with ideas and determination can make it.”
Researchers also found that office space in Sunderland averages £12 per sq ft, while value for money virtual office services cost around £85 a month.
Housing accommodation costs were also favourable, at an average of £474 a month for a typical two-bedroom home.