In contemporary world, Local Government Institutions are considered, by global intelligentsia and leaders, as a key to development, minority rights and strengthening of democracy. The efforts to chalk out a Global Charter for Local Self Government and the enforced European Charter of Local Self Government of 1985 are the glaring examples of global commitment to transfer the state authority to LGIs. Bangladesh,has the experience of LGIs since centuries but in a very raw form. Since independence, a number of efforts have been made to decentralize the central government’s authority, but all efforts have been limited to the tier-structures rather than strengthening the LGIs. This research has tried to find out the link between Fiscal Decentralization and Local Economic Development by conducting some case studies about the LGIs in Bangladesh. Primary as well as Secondary data has been collected and analyzed and a positive relationship has been found between Fiscal Decentralization and Local Economic Development. Finally, the paper has given some suggestions on how effective decentralization process can be implemented in Bangladesh.