Processes of the expected spatial socio-economic changes arise as a result of rational planning and continuation of development at regional and local level. A three-tier division ofthe local self-government creates opportunities for engagement of community in the rational planning model and local resource management, as well as usage of production factors; for socio-economic growth and improvement in the quality of life of the residents. The aim of the article is to show the functional structure and role of local government units in formation of regional and local policy toincrease economic growth, while maintaining the environmental protection requirements. 

region, regional and local policy, local self-government, economic potential