The number of internet users in Indonesia amounted to 104.96 million people in 2017, with an online penetration in the country at over 50 percent of the population. This number is expected to reach 133.39 million by 2021. Added to the fact that Indonesia has more than 17,000 islands it can thus be conceived that the development e-Government systems would give a major boost the effective and efficient delivery of public services, given that e-Government is “information technologies that have the ability to transform relations with citizens, businesses, and other arms of government can serve a variety of different ends: better delivery of government services to citizens, improved interactions with business and industry, citizen empowerment through access to information, or more efficient government management” (World Bank, 2005). The Special Province of Yogyakarta has an award winning E-Government System acknowledged by both government and private awarding institutions. The province is densely populated by students and has among the highest percentage of computer and internet literate citizens in the country. This paper intends to provide the challenges faced by the development and implementation of e-Government in Indonesia, with a special emphasis on the Special Region of Yogyakarta.