Sri Lanka has inherited a unitary state structure and a highly centralised approach to government administration. Since independence in 1948, various proposals to restructure government, including decentralising powers to provincial and local levels, have been proposed, but none have been fully implemented. The Sinhala nationalist parties and groups which have supported successive governments have generally rejected all decentralisation proposals. Moreover, the political elite has long been oriented towards and accepting of strong leadership from the centre, which has largely ignored local government and local development, with serious implications for much of the population. The tsunami of 2004 and the end of the war in 2009 saw NGO support and large amounts of foreign funding flow into Sri Lanka to assist in the recovery. Central government and its leadership have controlled the whole aid management and distribution process, by directing foreign funds towards conducting large scale construction projects at the local level without considering local needs. Despite restrictions imposed by central government, a number of NGOs have begun to play an important role in promoting local development through interacting with local government bodies and local communities. NGOs can, thus, be found to be at the forefront of endeavours to address social and economic needs at the local level. This study, examines how and why local communities have been neglected in development initiatives in Sri Lanka, and assesses the significance of support from NGOs in increasing the capacity of local government and in promoting local development. Hypotheses derived from the literature related to post-colonial criticisms, government-NGO relations, and NGO interactions in the policy process are examined and assessed. Based on research in the southern and eastern provinces of Sri Lanka, this study analyses the views of national, provincial and local level political representatives and administrative officials, NGO officials and CBO representatives. The research revealed that while local level respondents aspired to play an active role in decisions about the use of foreign support for local development, they tended to lack the knowledge and capacity to do so. Local level respondents highlighted the importance of NGO guidance in these processes, particularly in terms of promoting local people’s participation in local government decision making. This thesis concludes that NGOs can play a positive role in supporting local government in addressing development needs at the local level. Local government-NGO relations were found to have made an effective and significant contribution to fulfilling local level needs. NGOs can thus be seen to play a positive role in empowering local government and local communities and their involvement has potential to lead to a move away from highly centralised power structures.