The objective of this paper is investigate knowledge management practice in local goverment organization (especially in developing country). Design/methodology/approach: Research is held in Yogyakafta which use Qualitative method with data network analysis, depth inteMiew, sofi system and focus group discusion. lmpoftant finding of this research: the practice of knowledge management in local goverment is done continously to maange informal sector. This knowledge management practice is effective for the decision making processwho is done by localofficial. Oiginality/value: policy recomendation from fhis research ls restructure of localgoverment organization and encourage cooperation between units in organization.Teoritical recomendation: theory of hierarchical organization in local goverment organization is questionable. Democratic and dynamic environmental condition cause less hierarchical organization.