The System of Local Government is not a new system but existing before the independence of Pakistan, when the Indian sub-continent was under British rule, after the independence of Pakistan this system existed in Pakistan with different names and terminologies. Today's states are too vast in territory, having huge population, so it has become very much difficult for Central or Provincial governments to administer them effectively, in this connection, for this purpose, those provinces are further divided into Districts, Districts are further divided into Talukas and Talukas are further divided into Union Councils for effective management and services delivery, but the reality is that even having local government system Pakistan is suffering from many issues relating to local government. The purpose of local government is to facilitate the people, solving basic problems of people at basic level, providing them primary education, health, sanitation, roads, street lights, firefighting and other basic facilities, and there is sharing of power at grass roots level, so that local people can participate in government. This system is assurance of participation of people in government through their elected representatives, which they elect directly by their right to vote and this right to vote makes their representatives accountable towards them, this accountability is the key element of good governance, without accountability the concept of good governance is meaningless. Furthermore, the four essential elements of Good Governance: Participation, Accountability, Predictability and Transparency are also assured by local government. The aim of this research paper is to highlight the issues in local government system of Pakistan, which are creating hindrances in the way of good governance. [ABSTRACT FROM AUTHOR]