The Local Government Plan 2000 and the Local Government Ordinance 2001 provides for the establishment of a City District Government to respond to the specific needs of the mega cities and largely urban districts of Pakistan.

The Local Government Plan 2000 envisages that large cities like Karachi, Lahore, Faisalabad, Gujranwala, Multan, Hyderabad, Peshawar, Sukkur, Quetta, Rawalpindi and Bahawalpur will be declared City Districts in a phased manner. Initially Karachi, Lahore, Peshawar and Quetta and Islamabad have been declared city districts.

In the common districts, spatial planning and municipal services are the exclusive function of the Tehsil Municipal Administration but in the City District some planning and macro-municipal functions will be managed centrally by a City District Government, in addition to all the common district functions. The nature of infrastructure and population densities in urban areas necessitates city wide planning to achieve economies of scale, rationalisation of investments, or the benefits of modern technologies among other reasons.

Like the common district, the City District will have three tiers: the City District Government (CDG), the Town Municipal Administration (TMA) and the Union Administration (UA). In recognition of the need for specific institutional arrangements to respond to the nature of integrated planning and municipal functions in City Districts, the three tiers are not analogous to the ones in the common district: in the City District, the TMA will be responsible for those functions assigned to the Tehsil Municipal Administration in the common district to the extent that these can be performed by the TMA - i.e. those functions which due to technical reasons do not require a city level management.

When setting up the City District Government and TMA, two important principles have been kept in mind:

where technical factors allow, the principle of subsidiarity has to be used in determining which planning and municipal services/functions are assigned to the City District Government and which ones are assigned to TMA; and that the transition process should be smooth and no disruption or dip in services should be felt by the people.