Decentralization has long been a feature of the Sri Lankan government, primarily in response to the popular desire for democratic governance brought about by political and economic shifts over the past decades. The Sri Lankan government therefore instituted a three-tiered political structure at the national, provincial, and local levels. Creating local government is crucial because, in Sri Lanka, local governments are widely recognized as forms of democratic governance. However, despite its strong legal foundation and primary function in local development, whether local government fosters democratic governance as promised by the decentralization initiative is still unclear. In uncovering this, the objectives of this chapter are twofold. Firstly, to identify the provisions in the Local Government Laws to strengthen democratic governance, and secondly, to identify the issues and obstacles in promoting citizen participation, and accountable government as main aspects of democratic governance. The analysis results revealed that even though there are strong legal provisions to promote democratic governance, local authorities in Sri Lanka failed to do so due to the absence of a developed culture of governance with a prerequisite of citizen participation, lack of space for citizens to engage in decision-making process, lack of interest of citizens to participate in local government affairs, and gaps in existing laws on local government.