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The paper combines institutional and bargaining analysis to assess the consequences of decentralization policy reforms on the evolution of balance of power among presidents, governors, and mayors. I reject the limitations of static theories of decentralization in favor of a dynamic account of institutional evolution that incorporates the effects of policy feedbacks on preference formation in multi-staged processes. I define decentralization as a three-dimensional process that involves fiscal, administrative, and political reforms, and I distinguish between the partisan and territorial interests of bargaining actors. I propose a sequential theory of decentralization that considers actors? preferences, type of interests and coalitions, and the sequence of decentralization reforms. The argument of the paper is that the sequence and timing of fiscal, administrative, and political decentralization reforms and the type of political coalitions that initiate each round of reforms are two key determinants of the resulting evolution of intergovernmental balance of power. I test the argument by comparing the ways in which decentralization policies originated and unfolded in Argentina, Mexico, and Colombia between 1978 and 1999. The paper shows, against commonly held beliefs, that different trajectories of decentralization (a democratic path in Colombia, a technocratic path in Mexico, and an authoritarian path in Argentina) led to the strengthening of governors and mayors in Colombia and Mexico, and to the decline of governors? preexisting resources and capacities in Argentina. [ABSTRACT FROM AUTHOR]