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During the last two decades the process of decentralization has been extended worldwide. This process has taken place in developed countries but in nowadays, this process is also being applied in developing countries in order to challenge the monopoly of centralized decision making of governments. The decentralization reform in Albania has done progress during the transition period. Today the local governance in Albania is absorbing and implementing the decentralization legal framework which is approved up to now and also is moving toward a complicated but progressive process of decentralization and autonomy that combines the decentralization of functions/services with fiscal decentralization supported by the process of strengthening the local democracy and accountability through free election and local community participation. This practice is supported by the economic theory of decentralization that it is a process that can and should lead to the improvement of the services that citizens receive from government by balancing local needs and expectations regarding the quantity, quality, cost and mix of services. This paper makes a snapshot of the process of decentralization by evaluating what has already been achieved, what is in process and what are the challenges laid ahead. It does the analysis of fiscal decentralization and fiscal autonomy in Albania and also gives a short description about the European models (West and East European countries). This paper touches upon the main achievements and challenges on all the complex issues that relate to decentralization. It is mainly focused on the progress of decentralization during the last couple years. DOI:10.5901/mjss.2013.v4n10p524