Because of the need for decentralization in the Iran's centralized planning system, planners and experts have always been thinking about planning decentralization, provincial development and defining legal and institutional frameworks for it. It is to be noted that although outstanding efforts have been made during the recent years especially within Iran's third development plan years, provincial planning and development and its role in the national planning system are considered a big challenge. A look at the process of decentralization formation and evolution particularly in the areas of regional planning and development shows the turning points made during Iran's development plans legal documentation either after the Islamic Revolution or before it. It should be mentioned that form this standpoint, the third development plan (2000-2004) is viewed an outstanding turning point. Due to the emphasis on the system reform and institutionalization, provincial revenue- expenditure system was first devised in the development plan and the legal as well as institutionalized status of provincial planning and development was defined in its framework. Provincial revenue-expenditure system is a closed and consistent set that is composed of four essential pillars i.e. decision-making council, expert work groups, financial resources, and domain of activities. This system aims at internalizing provincial development process as much possible and increasing the participation motivation and accountability of provincial development in this process. With this aim, which is limited only to "acquisition of assets outlays" in the third development, provincial development plans in each province is defined as a function of the provincial revenue. Moreover, in this system a part of developed provinces' provincial revenues is paid to the national treasury and allocated to less developed provinces. It is another characteristic of this system and it is followed with the aim of balancing the development of various regions of the country have made difficulties for the full establishment of the provincial revenue-expenditure system within the third development. Plan. This paper starts with a brief overview on regional development decentralization trend in Iran. Then, it defines the characterstics and logic of the provincial revenue-expenditure system. It evaluates the performance of this system in the years of the third development plan and clarifies its opportunities and threats as well. Eventually, the paper goes to the challenges of an ideal system and its future prospects.

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