After the collapse of Soviet system the dual system of local government was introduced in Estonia. This became possible largely because of deep economic and political crisis. Estonia tried to solve the emerging capacity problems by municipal amalgamations, but did not succeed. The centralizing trends were persistent at the start, but with the strengthening of politico-administrative system it becomes dominant in the development of intergovernmental relations (IGR) in 2000th. This is conducive to the change of dominant pattern of central local relations – to the transformation of fused system of IGR. The inability of local elites to oppose to those trends was caused by political reasons as well as by drawing on traditional outdated understanding of local autonomy. Strategies of both – central and local elites – cannot provide perspective solution to imbalance of central local relations. Estonia should develop the pattern and values of multilevel governance which enables to be involved into intensive Europeanization process and into the formation of Baltic Sea integrated region.