Modern management tools that evolved through quality management initiatives have been providing effective solutions for organizational and operational problems encountered in private sector firms. The success of such initiatives in private organizations has stirred up a continuing wave among public sector departments and particularly among local governments to improve service quality and performance effectiveness. This paper presents a proposed scheme for a municipal performance measurement system for use at local government units in West Bank and Gaza. The system is based on quantitative measures that address key major municipal performance areas; these are financial, internal administrative, service quality, and regulatory measures. A portion of the scheme has been under trial-implementation in a local municipality and initial results demonstrated the potential of using it as a basis for a national municipal performance measurement process.