Despite continued efforts in recent years by numerous Libyan actors, the United Nations, and the international community, national politics in Libya remain paralyzed amid a rivalry for authority that has resulted in persistent instability. Nevertheless, advancements at the local level may offer Libya a way forward out of the current governance crisis. In the absence of capable and unified national institutions, local governance authorities in Libya, primarily municipalities, have sought to develop the capacity to deliver on the needs of Libyan citizens where the national government has failed. Evidence suggests that devolution of authority from the central to the local could help address crucial challenges facing Libyan institutions and the Libyan people—including effective service delivery and accountability. Increased investment in the development of local authorities in Libya through an emphasis on decentralization could contribute significantly to the long-term process of rebuilding the Libyan state. Such a decentralization process would not be synonymous with federalism. To the contrary, it would involve establishing a clear legal framework for local governance that would ultimately be dependent on the existence of a strong, national state. Indeed, a successful decentralization effort relies on the existence of a strong national structure that clearly defines the respective areas of responsibility of national ministries and municipalities. Nevertheless, major impediments, particularly at the national level, including limited political will, weak institutional structures, and the lack of a clear constitutional framework, remain. This paper therefore argues that the stabilization of Libya requires the simultaneous pursuit of bottom-up and top-down state building approaches. The paper begins with an examination of the existing legal framework in Libya regarding decentralization and the current constitutional debate, before assessing the advantages and disadvantages of decentralization based on an analysis of local capacity building efforts in Libya since the 2011 revolution, as well as lessons learned from other recent decentralization initiatives in the Middle East. It also examines the role played by the international community, such as the European Union, in boosting local capacity, and questions the impact of such local efforts amid intense international competition over Libya’s national political landscape. It concludes by arguing that the long-term success of local capacity building efforts is inherently dependent on simultaneous progress at the national level.