The constitutional reforms of July 25, 2022, mark a pivotal shift toward decentralization in Tunisia, establishing a new framework of local governance through the creation of four distinct types of local authorities. This transformation reflects a long-standing recognition in Tunisian constitutions—from 1959 to 2022—of the essential role local communities play in building a democratic and just state. This study examines the challenges and opportunities of decentralization by focusing on key variables: financial resources and budget management, clarity and scope of local powers, citizen participation, administrative capacity, transparency, accountability, and service quality in education, health, and infrastructure. These factors shape the ability of local governments to respond effectively to pressing issues such as rapid urbanization, climate change, and digital transformation. Using a qualitative and comparative approach, this research analyzes the evolution of local governance across Tunisia’s constitutional history and evaluates the current legal and regulatory frameworks. It explores the gap between the envisioned role of local communities in fostering democracy and sustainable development and the practical obstacles they face, including limited resources, bureaucratic inertia, and insufficient citizen representation. By illuminating the organizational and functional realities of local authorities, this study contributes to a deeper understanding of local governance in Tunisia. It offers insights into enhancing community participation, improving policy implementation, and building more resilient and effective local institutions that better serve citizens’ needs and support national development goals.