Local government is the third level of government in Australia, administered with limited autonomy under the states and territories, and in turn beneath the federal government. Local government is not mentioned in the Constitution of Australia, and two referendums in 1974 and 1988 to alter the Constitution relating to local government were unsuccessful. Every state/territory government recognises local government in its own respective constitution. Unlike the two-tier local government system in Canada or the United States, there is (largely) only one tier of local government in each Australian state/territory, with no distinction between counties and cities.

The Australian local government is generally run by a council, and its territory of public administration is referred to generically by the Australian Bureau of Statistics as the local government area or LGA, each of which encompasses multiple suburbs or localities (roughly equivalent to neighbourhoods) often of different postcodes; however, stylised terms such as "city", "borough", "region" and "shire" also have a geographic or historical interpretation. The council board members are generally known as councillors, and the head councillor is called the mayor or shire president. As of August 2016, there were 547 local councils in Australia.

Despite the (largely) single tier of local governance in Australia, there are a number of extensive regions with relatively low populations that are not a part of any established LGA. Powers of local governments in these unincorporated areas may be exercised by special-purpose governing bodies established outside of the local legislation, as with Victoria's alpine resorts; or directly administered by state/territory governments, such as the entirety of the Australian Capital Territory. The administrative area covered by local government councils in Australia ranges from as small as 1.5 km² (0.58 sq mi) for the Shire of Peppermint Grove in the Perth metropolitan region, to as big as 372,571 km² (143,850 sq mi) for the Shire of East Pilbara in Western Australia's Pilbara region.

As an exception to the generalisation that Australian local government has only a single tier, New South Wales has county councils, which are special purpose local governments governing county districts composed of two or more LGAs; variously responsible for water supply, flood mitigation and weed management; formerly they also played significant role in urban planning, electricity distribution, and some also operated abattoirs. By the 21st century, only a handful remain, with the majority of New South Wales LGAs no longer belong to any county council.

Local governments are subdivisions of the six federated states as well as the Northern Territory. The term "local government area" (LGA) is used by the ABS to collectively refer to all local government administrative zones regardless of the varying designations.The Australian Capital Territory has no separate local government, and municipal functions in Canberra and the surrounding regions (normally performed by local governments in other states) are performed by the ACT territorial government.

Local government authorities across the country have similar functions and powers,^{[citation needed]} but have different official designations in different states, which may vary based on whether the LGA is regional or for historical reasons. Below is a table that lists the various designations per state.

Most urban municipalities in all states are "cities". Many in Western Australia are officially "towns", even within the Perth metropolitan area. Many rural areas in Queensland, New South Wales, Victoria and Western Australia are "shires", while rural areas in South Australia have "district councils", and those in Tasmania officially use the title "municipality". Due to the Australian Capital Territory's small size it has no local government and is instead overseen by the ACT Legislative Assembly.

Sometimes designations other than "city" or "shire" are used in the names of LGAs, and today the stylised titles of "town", "borough", "municipality", "district", "region", "community government", "Aboriginal council/shire" and "island" are used in addition. The word "municipality" occurs in some states with differing meanings: in New South Wales it is typically used for older urban areas, and the word is used for some rural towns in South Australia. Larger towns and small metropolitan exurban centres in Queensland and Western Australia simply use the term "town", while in Victoria they are designated as "rural city". Historically, the word "borough" was common for small towns and suburban centers in Victoria, but nowadays only the Borough of Queenscliffe remains as the one and only borough in the entire country. New South Wales and Queensland have also introduced a new term "region" for outback LGAs formed by the amalgamation of smaller shires and rural cities. In New South Wales, where the Local Government Act does not mandate adopting a designation, some local government areas are legally known simply as "council", such as Port Macquarie-Hastings Council, Inner West Council and Federation Council. Some rural areas in South Australia are known as "district council", and all the LGAs in Tasmania that were previously municipalities have been renamed "council".