Decentralized recruitment and selection has been advocated by many developing countries as an alternative means for increasing efficiency, effectiveness and fairness in the recruitment of local government personnel. Like others, in the past two decades, Tanzania government also engaged on local government reforms program which aimed at among other things increasing efficiency in the recruitment and management of local personnel through empowering local councils to recruit and discipline their own personnel. Contrary to the expectation, practically, the central government still retains the power to hire and fire local government staff due to poor performance of decentralized system. Although a theory predicts the positive effects of decentralization such as effectiveness, fairness and efficiency in recruitment and selection, these effects have not been realized. One of the arguments which has been advanced in the main stream literature concerning its failure is the existence of corruption and nepotism in the local council and lack of capacity of the local council to recruit the required number and quality of local staff. Nevertheless, other factors related to informal institutions which have impact on the quality of recruitment have received little attention. The objective of this article is to explicate these institutional factors which have impacts on the performance of decentralized recruitment and selection. In order to achieve this objective, I conducted qualitative research with Tabora Municipality in Tanzania as a case study design in which the research started with review of policy and guidelines. Then, the interviews and focus group discussions were conducted with heads of department, other key officials and the councilors. Based on these findings, I argue that to better understand why decentralized recruitment fall short, we should study the entire institutional context because formal rules and procedure provide the guidelines but the existing informal social rules and values shape the way these guidelines are interpreted by the actors involved in recruitment and selection process.