Decentralization is the bedrock of democracy without which the objectives of Good Governance are impossible to achieve. Decentralization is a way of empowering citizens and considered to be one of the most important institutions of the democratic society. Pakistan as a parliamentary democratic society has a federal setup composed of four federating units. Decentralization in Pakistan is in the form of local government has been facing controversies and challenges with the coming of every new political government. The chapter will share with its readers the history of decentralization attempts in Pakistan since independence along with the historical 18th Amendment which proved to be a major constitutional event in the history of local government. It will not only be the historical description of local governments, rather the history of decentralization in Pakistan will be evaluated and compared with every new era to date. Then it will lead us to identify the issues and challenges in local governance in Pakistan and lead us to conclude it by putting forth suggestions for institutionalized local governance by integrating the global successful example of decentralization with the indigenous realities of the country.