The aim of this research project is to study the ways in which territory—particularly its socio-cultural dimension—influences the participatory decentralization (PD) initiatives of the state from a comparative and interdisciplinary perspective. To achieve this objective, this project analyzed decentralization experiences at the municipal level within the national-level context of political decentralization processes in Uruguay and Chile. Uruguayan cases were compared with the Chilean ones based on Mill’s method of difference, also known as “most-similar design,” which is considered one of the most useful qualitative approaches in terms of studying democratization in Latin America (George & Bennett, 2005). However, I used Mill’s method in two distinct ways, comparing similar municipalities between the two countries, which allowed me to vary the national-level political project while holding municipal characteristics relatively constant; and comparing municipal cases within each of the two countries, which allowed me to vary the socio-cultural dimension of territory within a single participatory decentralization model. Comparing the effect of the political project on PD outcomes to the effect of the socio-cultural dimension of territory allowed me to assess which factor proves more important to local outcomes. Although there are significant differences between Uruguay and Chile in terms of their political projects of decentralization, rural and poor municipalities with a high percentage of minority ethnic communities—in this case, Afro-descendant populations in Uruguay and indigenous Mapuche peoples in Chile—, still face deep, structural obstacles to implementing participatory decentralization, differences which are explained by the effect of the ethno-cultural dimension of territory and by the effect of geographical residence on the PD outcomes over the last decade. This alternative approach to participatory decentralization based on the socio-cultural dimension of territory highlights the structural obstacles to successful participatory decentralization, such as clientelism, caudillism, centralism and racism. It also implies that deepening participatory decentralization requires a strategy to improve civic engagement and horizontal governance of the local civil society. In also has the potential to foster accountability and to redistribute political power at the municipal level in both countries.