Though the policy of decentralization is aimed at bringing government closer to therncitizens in the HPNRS, it is still at a very early stage and thus demands a great deal ofrnefforts for realizing significant changes. This study gives an examination of therncontribution effective decentralization policy play in building regional and localrninstitutions in the HPNRS. It looks for establishing whether enough politica I,rnadministrative, fiscal and human resource management power have been devolved andrnif not outlines the challenges to this procedure. Questions herein, inter alia, are has therndevolved powers and responsibilities have been institutionalized? If yes, to what extent,rnif not what w.e nt wrong?rnA triangulation method was used to collect data in this study. One hundred fiftyrnrespondents filled survey questionnaire, twenty five informants were interviewed whichrnis accompanied by focus group discussion and documentary review. The findingsrnindicate that bringing government closer to the citizen has occurred in a sense thatrnthere is a mechanism to empower the Harari as well as other nationalities in thernregional government as compared to local government.rnNevertheless: the legally pronounced objectives have not been sllccessfully achievedrnsince the important preconditions pertinent to institution-building such as politicalrncommitment, availability and access to resource, capacity of implementing agencies,rneffective inter-governmental relationships, and planned and coordinated capacityrnbuilding efforts are not effectively fulfilled. This study recommends that the regionalrngovernment should be committed to decentralizing power, authorities, functions andrnresources to the sub-regional institutions. This should be accompanied by buildingrnimplementing capacity of regional as well as local institutions.rnKEY WORDS: Decentralization: Institution: Regional Institutions: Local Institutions: Institution-building:rnCapacity: Capacity Building: Harari Peoples' National Regional State.