This study aims at assessing the performance of local government in Palestine in regard to fiscal and administrative decentralization. Data was gathered from the Ministry of Local Government, Ministry of Finance and a questionnaire was sent to 12 municipalities' key officials. It was found that the government is organized into the central government headed by the president, the cabinet, the governorates, mayors and village councils. The main functions of the local governments are to provide the necessary needed services. It was found that there is a degree of decentralization in providing the intended services as the functions of each level is clearly defined by the law, even though there is an overlapping amongst these functions due to the current situation instability The study explains several aspects including organization of the local government, decision making process, functional responsibilities, partnership among local government and the performance of these partnerships, employment, training programs, the most urgent issues regarding decentralization process, local government finances, financial standing of municipalities, relationship between central and local governments, and decentralization reforms under preparation, The study ends up with conclusions and recommendations.