Good governance is a critical element to economic development both at the local and national level. Devolution, which is a form of decentralization, is a means of achieving good governance if implemented appropriately. Government plays a pivotal role in the governance framework of a country. This study aimed at exploring how governance of Nairobi City can be improved under a devolved system of government to foster economic development. The study specifically looked at government effectiveness which is one of the Worldwide Governance Indicators. Through a literature review, the study looks at how devolution can improve governance, and what government effectiveness entails, not only from the World Bank perspective but also from other related literature. The major assumption of this study is that improved governance consequently leads to enhanced economic development, as argued by numerous scholars and practitioners in previous studies (Todaro and Smith, (2009) Mcneil and Malena, (2010) and UNDESA 2007). Furthermore, this study assumed that despite only focusing on one of the six indicators, an idea of good governance as a whole will be obtained. The study used a mix of qualitative and quantitative approach of a case study of Nairobi City. Nairobi City is not only a unit of devolution under the new constitution, but will also host the national government. Furthermore, it is also the financial stronghold of the country. Data was collected from two sets of respondents using two different instruments. A questionnaire was used to collect data from the citizenry, and face to face interviews were used to collect data from government officials. The questionnaire focused on capturing citizen perceptions on government effectiveness. Respondents were selected through convenient sampling at pre-determined service delivery points within Nairobi City. The face-to-face semi-structured interview gauged the level of government effectiveness of selected government institutions within Nairobi City. For the former instrument, the data was analyzed through SPSS and Microsoft Excel; and presented in tables, charts and graphs. For the latter, a descriptive discussion has been used to illustrate findings. The study found that government institutions within Nairobi to an extent have established mechanisms and systems to improve service delivery, and consequently promote government effectiveness. It is observable from the study that, the systems in place do not respond to the citizen needs and expectations as illustrated by a satisfaction index of 54 percent.