Rural areas in Poland have endogenous potentials which should become the drivers of sustainable local development. At the same time – as indicated by both the evolution of economic theories related to regional development, as well as researches in the field of institutional economics – the main factors determining growth and economic development are the institutional environment where economic processes are being developed and the quality of institutions per se in se. Among the latter, the quality of governance is of particular importance. It directly affects both the broadly understood institutional environment, as well as it determines the implementation of development policies. In reference to the rural areas and to the use of their endogenous resources the implementation of the rules of good governance by local authorities seems to be very important. In order to measure the quality of governance at the local level and to check how it affects the use of endogenous potentials of rural areas it was proposed to adapt the theory of good governance to the specifics of the functioning of local authorities in Poland. Also special research tools have been developed and empirical research in four locations has been carried out.