Nepal provides a striking context for examining decentralization programs because the country is highly centralized politically yet has poor communications and transportation. Its development performance has also lagged. Decentralization has been promulgated by the ruling elite in order to increase participation, defang opposition, and improve efficiency. This study shows the difficulties involved in setting priorities, planning, and implementing programs at district and subdistrict levels. It also shows that there are dangers from the capture of local progrmas by local elites. Moreover, decentralization appears to have further burdened the system of informational flows between the center and the peripheral areas without any notable improvement in efficiency.