go to app/code/local/mage/adminhtml/block/sales/order/grid.php
**app/code/local/mage/adminhtml/block/sales/order/grid.php
add this code in protected function _prepareCollection()
$table1 = Mage::getSingleton('core/resource')
->getTableName('sales_flat_order_address');
$shipping = "(select max(t.street) from $table1_prepareCollection()
as t where t.parent_id = main_table.entity_id )";
$collection->getSelect()->from('', "$shipping as shipping_city");
$table1 = Mage::getSingleton('core/resource')
->getTableName('sales_flat_order_address');
$shipping = "(select max(t.street) from `$table1` as t where t.parent_id = main_table.entity_id )";
$collection->getSelect()->from('', "$shipping as shipping_city");
and in protected function _prepareColumns()_prepareColumns()
, add following code
$this->addColumn('shipping_city', array( 'header' => Mage::helper('sales')->__('Shipping Address'), 'index' => 'shipping_city', 'filter_index' => 'shipping.city' ));
$this->addColumn('shipping_city', array(
'header' => Mage::helper('sales')->__('Shipping Address'),
'index' => 'shipping_city',
'filter_index' => 'shipping.city'
));