This paper discusses the main issues of fiscal decentralization in the Czech Republic. It provides a general overview on the new Municipality Act and the municipal finance reform that laid the foundations for development of the self-governing principle in the Czech Republic. The paper also identifies the major problems. This paper was prepared by the Urban Institute for USAID. It was published in the Intergovernmental Fiscal Relations in Eastern Europe Sourcebook on CD-ROM (Please contact: bwalter@usaid.gov) or at http://www.urban.org/centers/iac/localgov/index.html. Other papers from this book are available in this library.