A number of questions, demanding their settlement during reform of local government, are put in the article. This refers to improvement of relationship between self-governing authorities and state authorities, explanation of the constitutional norms governing these relations. Author analyzes changes of the federal legislation on local self-government according to which organizational insulation of selfgoverning authorities and state authorities is defined in a new way. The measures aimed at providing a functional purpose of local government are offered in the article. Need of restriction of the state powers delegated to local governments, the sense of matters of local significance decided by local self-governments, arguments for specification of the list of matters of local significance are given. Need of joint actions of self-governing authorities and state authorities to solve social and economic problems under condition of strict demarcation of their powers is also proved.