The quest for local government autonomy in Nigeria has been a recurring issue, which pre-date the country's political independence. The struggle has thrown up various reforms including the 1976 landmark reforms of the local government system in the country aimed at democratizing the local government administration. Despite the reform measures, the states have continued to maintain strong grip of control over local governments including arbitrary dissolution of elected local government councils by state fiat for varying political reasons. This unhealthy development has provoked the concern of this paper to examine the challenges of local government autonomy in the country and the implications for improved performance of local governments at the grassroots. The paper noted that state governments have exploited certain loopholes in the constitutional provisions regarding inter-governmental relations to undermine the autonomy of local governments. Thus, the paper recommended a review of the constitution to address the contradictions that gave room for the abuses by the state governments. This is to guarantee meaningful autonomy for the local governments in the conduct of their affairs through which they could be strengthened to respond effectively to the demands of effective and efficient services delivery at the local level. The thrust of the paper is that autonomy of the councils will ensure the local governments provide people-oriented programmes, which will enable the people at the grassroots to feel the impact of governance.