Consumer interest in locally produced foods marketed through local food networks has been increasing. Local food networks utilize local supply chains such as direct market sales to consumers through CSAs, farmers markets, farm stands, and other alternative outlets. Our goal is to examine the role of food cooperatives in strengthening the local food networks and distributing locally produced products. We utilize data from a national study which includes case studies with three leading food co-ops and a national survey of the general managers of food co-ops. We focus on analyzing the business strategies and competitive advantages of food co-ops sourcing local foods from local producers and marketing these local foods to consumers. We identify the emerging business practices, ethics principles, and competition issues for food co-ops with respect to sourcing and marketing of local products. Specifically, we provide a literature review on local food systems, examine local food definitions and recent trends for food co-ops, examine the business models and ethics principles for food co-ops, discuss the business strategies in sourcing and marketing of local foods by food co-ops, and examine the frequency and effectiveness of these business strategies to source and promote local foods. We show that when compared to other grocers, food co-ops have competitive advantages in working with local producers and often play a key role in the local producers’ business viability.