despite arguments that decentralization creates successful rural development, studies in many countries find that the adoption of decentralization does not always make rural development more effective. while decentralization theoretically offers substantial opportunities for successful rural development, all too often the implementation is hampered by various challenges. this paper deals with this challenging issue, which is to identify the potentialities and challenges brought by decentralization for rural development. through literature review, this paper suggest countries applying decentralization to pay attention on several main factors consisting of formulation of local budget, social capital, local capacity, and community participation.