This article seeks to lay a theoretical foundation of the internal decentralization (decentralization in the local municipality): its essence and content are defined, the main forms as well as the kinds of forms are identified. This is performed by using theoretical propositions of decentralization in the state (at the state level) following different researchers’ works and verifying whether they are suitable for local municipalities of Lithuania and other countries. In the article the set goal is being sought by these actions: 1) the origin and the meaning of the word “decentralization” are explained; 2) the essence and the content of decentralization in the state (at the state level) are defined; 3) the essence and the content of decentralization in the local municipality are defined, its main forms and kinds of forms are named; 4) currently the most frequently applied forms of internal decentralization in local municipalities of other countries are submitted. In the opinion of the author of the article, decentralization in the local municipality (or internal decentralization in the local municipality) means the transfer of the powers assigned to municipal bodies, which belong to a higher hierarchical level, to a subordinate or non-subordinate bodies, which belong to a lower hierarchical level, or division of powers to a bigger number of bodies of the same hierarchical level. The bodies that have received these powers are guaranteed some discretion to make decisions and operate. Moreover, a certain interaction (relations, responsibilities) between the bodies that have transferred the powers and the ones that have received those powers is foreseen. From the author’s of the article point of view, the internal decentralization in the local municipality is performed by these forms: 1) deconcentration; 2) transfer of powers (delegation); 3) fiscal decentralization; 4) economic decentralization. The author thinks that at present the most frequently applied forms of internal decentralization in municipalities of different countries are the following ones: 1) composition of branch and/or functional committees (commissions) of municipal councils and transfer of powers (delegation) to them to operate and to adopt decisions on behalf of the municipal council; 2) transfer of a part of powers (delegation) of municipal councils (representative government institutions) to the executive institution; 3) application of different ways of economic decentralization, starting with the most ordinary and gradually moving to the introduction of more complicated forms of PPP (Public Private Partnership); 4) transfer of powers (delegation) to the territorial communities (with executive bodies) of residential areas or their parts; 5) transfer of powers (delegation) to communal organizations, frequently called „neighbourhood communities“; 6) transfer of powers (delegation) to the self-government bodies of schools, to public services consumers’ protection councils or bodies of a similar type; 7) composition of structural-territorial subdivisions of the municipal administration (with different legal status) and transfer of powers (delegation) to them to manage the affairs of the inhabitants of one or several residential areas, to provide basic administrative and/or public services.