Municipalities derive their powers from Illinois statutes. Under the first state constitution a set of administrative laws were highly functional because municipalities shared many similarities. However, it became increasingly cumbersome for the General Assembly to approve numerous exceptions for large cities with more specific needs that required deviation from the established Municipal Code. The 1970 Illinois Constitution allowed municipalities, with a population over 25,000 or municipalities that voted by referendum, the option of asserting home rule authority.

Illinois has 1,285 municipalities. Although the Illinois Municipal Code does not require municipalities to provide a particular set of services, most traditionally provide street construction and maintenance, police and fire protection, zoning and planning, and water and sewerage services.

Municipal governments receive nearly 30 percent of their revenues from the state primarily through shared income, sales, and motor fuel taxes. Many municipal governments also receive grants from the state.