Decentralization in Cambodia took a revolutionary turn in 2001. Through the decentralization policy, the direct election of Commune/Sangkat (CS) councils was accomplished by local residents in 1633 CSs. CS councils are equipped with substantial resources allocated from the central government to develop their jurisdictions. Since 2002, CS councils have undertaken extensive public investments to promote local economic development and eliminate poverty. Against this background, this study examines whether the decentralization reform in Cambodia has contributed to local economic development using a panel dataset from the years 2007-2015. Least Square Dummy Variable regression models have been estimated. The independent variable used as a measure of decentralization is budget transfer from the central government to CSs, while proxy indicators of local economic development in CSs are used, such as the number of small businesses, the number of motor vehicles, the infant mortality rate and poverty rate in each CS. The results have shown that there is a positive link between intergovernmental fiscal transfers and local economic growth.