Local government institutions (LGIs) in Bangladesh, even after having a tradition and practice of hundreds of years, is still not regarded and respected fully as effective, functional and credible service delivery mechanism. However, over the past decades, major efforts have been undertaken in Bangladesh to strengthen the role and the capacity of LGIs. Currently, LGIs in Bangladesh have separate systems for rural and urban areas. Each type of local government is guided by its own separate and operational framework. However, the way the legislations are enacted and executed, each tier and unit has become a water tight compartment. The interdependence and inter-organizational relationships are generally ignored. As a result local government is not growing as composite and comprehensive system. While further local government strengthening will require building the capacity of actors within the current local government system, there is also a need to analyze whether the current local government laws are constraining the performance of local governments. This study is basically a review and analysis of the current local government laws which unravels the anomalies within this legal framework. The study also has come up with some pragmatic solutions that will help to strengthen the current local government system.