Since the enactment of Law Number 22 Year 1999 regarding Local Government (the law was revised by Law Number 32 Year 2004 ), local governments now play a greater role in administering their areas.
Foreign policy, defense (including armed forces and national police), system of law, and monetary policy, however, remain the domain of the national government. Since 2005, heads of local government (governors, regents, and mayors) have been directly elected by popular election.
A province (Indonesian: Provinsi) is headed by a governor. Each province has its own legislative body, called Dewan Perwakilan Rakyat Daerah (literally means "Regional People's Representatives Assembly"). Governors and representative members are elected by popular vote for 5-year term.
Indonesia is divided into 34 provinces. Eight provinces have been created since 2000. Five provinces have special status:
Aceh (also known as Nanggroe Aceh Darussalam (formerly: Aceh Special Region), has greater role in local government, which includes its own Islamic Sharia law (for Muslim citizens), flag and provincial song, local political parties are allowed, and decisions or laws made by the central government which directly affect Aceh's administration must be referred to the local government or legislative body.
Yogyakarta Special Region. The Sultan of Yogyakarta is de facto governor of Yogyakarta since he is given priority when electing the governor. For centuries, the Sultanate of Yogyakarta has reigned in the region.
However, recently the central government proposed a law that required the governor to be popularly elected as in the other provinces, while still giving the sultan significant political power. The proposal is still under debate with objections from the people of Yogyakarta including the local legislative body and the sultan himself.
Papua (formerly: Irian Jaya), since 2001 local government has a greater role, including use of its own flag and song of province, and the governor is required to be of Papuan origins.
West Papua (formerly: Irian Jaya Barat), has the same status as Papua.
Jakarta Special Capital Region, is the capital city of Indonesia.
The Governor of Jakarta has the power to appoint and dismiss mayors and regent within the Jakarta Special Capital Region. The local government is allowed cooperate with other cities from other countries.
Each province is divided into regencies and cities.
Regency and City
Regency (Indonesian: Kabupaten) and City (Indonesian: Kota), collectively known as "Daerah Tingkat II"  is a local level of government beneath that of province, however they enjoy greater decentralization affairs than province does, such as provide public schools and public health facilities.
Both regency and city are the same level, having their own local government and legislative body. The difference between a Regency and a City lies in differing demographics, size and economics.
Generally the regency has larger area than city, and city has a non-agricultural economic activities.
A regency is headed by a regent (Indonesian: Bupati), and a city is headed by a mayor (Indonesian: Walikota). Regent or mayor and member of representatives are elected by popular vote for a term of 5 years.
Each regency or city is divided into subdistricts (Kecamatan).
A subdistrict (Indonesian: Kecamatan) is an area within a regency or city. The head of a District is known as a "Camat"'. Camats are civil servants, responsible to the regent (for regency) or to the mayor (for city).
In Papua Province and West Papua Province, this administrative level is translated as "(Indonesian: Distrik)", and is headed by a "Head of District" (Indonesian: Kepala Distrik).
Each district is divided into desa (village) or kelurahan. However in Aceh, Indonesia, a mukim is a subdivision of a district. A mukim contains some villages (gampong).
Village: Desa and Kelurahan
The next level is that of the Desa or Kelurahan. Both Desa and Kelurahan are the area within a district, however Desa enjoys greater local matters than Kelurahan does.
In Indonesian, as in English, village (desa) has rural connotations, in the context of Indonesian Government Administration, a Desa can be defined as a body which has authority over the local people in accordance with acknowledged local traditions of the area. Desa is headed by "Head of Desa" (Indonesian: Kepala Desa), who is elected by popular vote.
Most Indonesian villages use the term "desa". In some places, however, there are many other terms used, i.e.:
Gampong in Aceh
Nagari in West Sumatra
Dusun in Bungo Regency (Jambi)
Kampung in some places in Indonesia:
Lampung (in Central Lampung, Mesuji, Tulang Bawang, Way Kanan, and West Tulangbawang regencies)
East Kalimantan (in Berau and West Kutai regencies)
Pekon in Pringsewu, Tanggamus, and West Lampung regencies (Lampung)
In Bali, there are two forms of "desa", i.e. desa dinas (service village) and desa adat (cultural village).
Desa dinas deals with administrative functions, while desa adat deals with religious and cultural functions.
Lembang in Toraja and North Toraja regencies (South Sulawesi)
Though Desa and Kelurahan are part of a district, a Kelurahan has less power than a Desa.
A Kelurahan is headed by a "Lurah".
Lurahs are civil servants, directly responsible to their Camat.
A Kelurahan is part of Regency/City government bureaucracy.