This policy paper looks at the potential of decentralization to contribute to social justice, via an analysis of three highly centralized areas of social development in Serbia – education, healthcare, and social protection. The text provides a comparative examination with similar European countries of levels of political, administrative and fiscal decentralization. It further identifies areas and topics where further decentralization would make practical sense, as well as the level of such decentralization, having in mind not only the current allocation and financing of competencies and functions, but also the capacity of local authorities for adopting new ones. The paper provides concrete proposals for midterm decentralization, not only through amending institutional and legal framework, but also through strengthening local self-government capacities for successful implementation of newly decentralized functions and competencies.