The article studies the problem of the local self-government autonomy as regards its controversial political status as being conceived traditionally as being simultaneously included and excluded from state governance system. It is posited that in existent structural conditions that are enforced by state territorial principle of polities making autonomy of local self-government is elusive and states that it can be realized in alternative institutional environment connected with transnational deterritorialization of social processes. The article demonstrates two emerging possibilities of local government evolution. The first alternative is connected with creating other structural environment than the state – an urban network and leads to further autonomization. And the second is the trend to a deeper integration to the state structural order with losing the need for institutional autonomy. Any of these alternatives means that a marginal status of included/excluded institution will be lost. Today we face the process of differentiation of local political unities between two structural poles and this in turn makes it possible to discuss a new emergent field of politics for defining the form of aggregating the territory, political community and power apparatus. States and urban networks represent evolution alternatives and thus the distribution of local units can be conceived as a strategy in competitive process of institutional transformation.