ABSTRACT This research was ~rned at the role of local revenue collection and service delivery in lower local government in Mbarara local government~ Mbarara District local government. The study was based on three m~n objectives which were:~ to find out the methods of revenue colledhon in ~arara local government, to find out how revenue collected has helped in service delivery in local governments and to find out the challenges faced in revenue collection in ~arara local government. The researcher obtained a letter of introduction from Kampala International University research unit, which was presented to the officer in charge of Mbarara local government. Local Government where the researcher’s case study was based. The researcher used both qualitative and quantitative research designs with a sample of 92 respondents who included the staff of Mbarara local government. Local government. Qualitadve data was obtained through questionnaires, interviews and observation while quantitative data was obtained through computation and analysis. The research findings showed the challenges faced by the District Local Government such as; political inte~erence, tax evasion and tax avoidance, how revenue collection could be improved and how local revenue had a strong impact on service delivery in local governments. The researcher concluded that local governments have challenges in revenue collection but such challenges were not beyond control. Basing on the findings the researcher concluded that revenue collection has a ~eat impact on service deliveDl. This could be evidenced with poor service delivery with a decline local revenue collection and improved service delive~ ~th a ~se in revenue collection. However the researchers recommended measures to improve on revenue collection like training tax collectors, sensitizing the masses. The researcher suggested that future studies should be conducted to analyze any other factors that affect revenue collection as well as service deliveiy in local governments.