In most developing societies, the state assumes responsibility for control of education. However, in recent years, educational leaders in a number of countries along with policy analysts in the donor community have proposed a number of arrangements for decentralizing education. This paper draws primarily on the experience of Sri Lanka to examine the potential of several examples of educational decentralization. The first section describes the components of educational systems in Sri Lanka and discusses the availability of resources and services, and the ways these are mobilized. This is followed by a discussion of decentralizing policy options, with reference both to school level and distribution of resources and services in various developing countries. The next section reviews the historical circumstances in the developing nations that gave rise to centralized education systems--the requirements for national competitiveness, social stability, and equality of access. Arguments for and against decentralization follow, along with a discussion of the political economy of decentralization, and of the cluster concept as an intermediate reform for coordinating programs and facilitating communication among isolated rural schools. The paper concludes with 12 recommendations to guide the decisions of educational leaders in the development of policy options. (TE)