This paper addresses the wide range of problems that municipal authorities face in financing urban development as they respond to the challenges of major shifts in their economic base resulting from falling trade barriers and a globalizing economy. The main emphasis is on developing countries, where the challenges are the greatest and the resource constraints most acute. Using case studies to reflect the wide differences in the degree of fiscal decentralization and financial autonomy that exist among countries in any particular region, the paper focuses on the challenges faced, local financial management and performance, partnerships to address pressing urban issues, and emerging trends in the financing of capital investments. The paper highlights creative initiatives in emerging, transitional, and advanced economies. Although the focus is on finance, selected initiatives tend to: promote democratic local governance; foster partnerships involving communities and stakeholders in urban development initiatives; and strengthen the capabilities and resources of local governments as the pivotal partners in the development process. The paper\ documents the emergence of several important new trends: the broadening of locally generated revenue sources; the strengthening of local financial management, the growing reliance on partnerships to finance capital investments, and enhancements to promote access to long-term credit for municipalities. Particular importance has been given to the documentation of novel ways of tapping private sector resources, such as strategic partnerships and local development funds.