In 2003, Indonesia's decentralization reform was in its third year of implementation. The “big bang” start had marked the transfer of resources — assets, personnel and finances — to the regions to compensate for the newly added authorities and functions. While the speed and size of the changes to formal structure was phenomenal, the adjustment of non-formal institutional settings was likely to take a long time. Many conceptual and practical problems remained and the path to reform was continuously driven by an evolutionary change in the practices as well as in the perception and expectation of decentralization. Drawing from SMERU field research, this chapter highlights the dynamics of the implementation of the decentralization reform at the local level in the first two years of the process as well as some related issues and concerns.