The United States is in the midst of massive devolution or decentralization of domestic programs in health care, welfare, and other functions. With devolution come greatly increased responsibilities for local governments. As local governments are assuming more responsibility for policymaking, management, and implementation of important national goals, it is important to consider their capacity or ability to take on these added responsibilities. This article asks critical questions, poses problems entailed in measuring capacity, challenges the question of whether local governments have the necessary capacity to undertake new demands being placed on them, and discusses the special capacity-building needs of local governments. It may be more important for local governments to be able to obtain additional capacity to meet new challenges than for them to have the capacity in order to be ready to receive the new challenges. In a sense, it is irrelevant whether they have the capacity because the federal government with considerable public support has decided that local governments will take on more responsibility for domestic programs. The question, then, is what can be done to help them perform their expanded roles as well as possible. Information sharing, networking, removing barriers to local flexibility and creativity, and technical assistance are some of the opportunities higher-level governments and other technical assistance providers, such as universities, have for increasing the capacity of local governments.