Over the past two decades, Peru hasachieved remarkable economic success. Average annual GrossDomestic Product (GDP) growth has exceeded 5 percent since2001. Poverty has been consistently reduced, and sustainedimprovements have been observed in social and humandevelopment. The poverty incidence rate fell from 58 to 23percent between 2004 and 2014, and households’ incomes at thebottom 40 percent grew 50 percent faster than the nationalaverage. The structural transformation of Peru’s economystriking fast and widely shared growth transformed Peru intoan upper-middle income and diversified economy. This reportanalyzes recent trends of the fiscal decentralizationprocess in Peru and presents a set of reform optionsdesigned to harvest the envisaged efficiency and equitygains in service delivery that the fiscal decentralizationwas expected to bring. The analysis and policy options arepresented in a conceptually logical order: (i) departingfrom institutional arrangements in the vertical structure ofsubnational governments passing to (ii) the need of aclearer definition of spending responsibilities among levelsof government that needs to befollowed by (iii) acommensurate redefinition of revenue assignments and (iv)enhancing equalization role of the transfer system.