Local government of Bangladesh is an important aspect to make development at local level. It plays vital role in socio-economic development of the country. It is a process of political decentralization and ensures human rights, democracy, and accountability to society. The structured and well organized local government is the pre-condition to fill up the need of peoples demand and it is crying need to our developing society The objectives and aspirations of local Government depends on how much it is being institutionalized in its practice. Different form of institution of W.Richard Scott (2001) like regulative, normative, and cultural-cognitive of the organization are used to analyze the institution of local government of Bangladesh as a theoretical concept. This concept has been developed in analyzing data of the study. The sources of data are purely secondary. The possibilities and weakness of institutional capacity of local government in Bangladesh have been highlighted in the study.