One of the reasons that force countries to adopt federal system is that, federalism keeps government closer to the people. Many problems require no uniform solution throughout a country as local circumstances, local traditions, and even local tests may differ. Local conditions may call for a local formula. Hence, the more the local government is, the greater the opportunity for communication between them and those who put them there.Ethiopia is a least developed country where decentralization and participatory models of local governance are still evolving. The country entered in 1991 into a decentralized system. This book explores the legal place, powers and functions of local governments in federations in general and the State of Oromia, one of the nine States of Ethiopia in particular. Furthermore, the book identifies those obstacles (be it the law or the practice) that hamper the actual functioning of the Local Governments in Oromia to exercise the ''self-rule'' aspect of federalism.