The purpose of this paper is to identify the characteristics of strategic planning systems of transit agencies that enhance these agencies’ ability to respond effectively to federal legislative requirements and mandates. Analysis of data from 54 transit agencies, using structural equations, revealed that strategic planning enhances a transit agency’s ability to respond effectively to federal legislative requirements and demands of host communities. This is particularly so when it is designed to consolidate the various unit action-plans into a system-wide strategic plan. Additionally, for strategic planning to be effective, it should receive more than a lip service from top and unit or division level managers, it requires the involvement and commitment of top and division or unit managers, and it should be designed to have an external orientation. That is, it should focus on an organization’s responsiveness to the demands of its customers and it should identify and exploit future growth opportunities. Furthermore, effective strategic planning requires involvement of employees, particularly those who will be responsible for the implementation of the resulting plan, and it must fit the management and decision making styles of the top and unit or division level managers. These characteristics are intended to provide guidelines to agencies intending to use strategic planning as a tool of effective strategic management.