This paper investigates if devolution of political power in conflict-affected areas can reduce violence. Political decentralisation has been widely recognised to improve access to local public services. By providing institutional means to address local grievances, its role in diffusing social tensions has also been suggested. However, there is lack of systematic evidence on the role of local self-government in mitigating social-unrest arising due to local socio-economic issues. Our paper addresses this gap in the literature by assessing the impact of a local government institution, introduced in the Adivasi districts in 1996, on Maoist insurgency in India. The local councils aimed at addressing Adivasi grievances by recognising their traditional lifestyle and land, forests, and water rights, thereby reducing their incentive to participate in insurgency. However, empirical analysis performed using difference-in-difference methodology suggests that Maoist insurgency, as reported in Global Terrorism Database, increased post-decentralisation. We make sure this result is robust to various alternative explanations including state-level policy changes and political environment. Drawing on extensive empirical tests as well as existing qualitative studies, we show that an unequal local power structure and weak state-capacity in implementing the decentralisation programme resulted in local elites appropriating its benefits. This increased Adivasis grievances and consequently insurgency. © 2018, © 2018 Informa UK Limited, trading as Taylor & Francis Group.