This chapter explores the critical nexus between population decline and the rescaling of local government in Italy, with a focus on small rural municipalities. Through a detailed assessment of demographic data, municipal traditions, constitutional guarantees, and policy interventions, the chapter highlights the importance of including the populations affected in rescaling reforms. It argues that successful strategies require a balance between top-down and bottom-up approaches, coordination between the national and regional legislatures, and collaborative governance between the public sector and civil society. The chapter examines the current state of municipal government, and the theory and practice of municipal mergers and inter-municipal cooperation as potential solutions to enhance the administrative capacity and service delivery in small municipalities, showcasing and explaining the significant variations between Italian regions. It concludes that Italy’s fragmented territorial governance suffers from unfinished reforms and centralized policies that negatively impact the effectiveness of both rescaling reforms and policy interventions that aim at enhancing the institutional sustainability of rural local government.