In spite of the scant evidence of a positive correlation between decentralisation and strengthened local development and governance, decentralisation has been promoted as a tool to consolidate peace and re‐build states in countries emerging from violent conflict, especially in settings torn apart by ethnic and other identity‐based cleavages. A key difficulty decentralisation has faced in many non‐conflict settings is related to the challenge of instituting effective mechanisms of accountability. This difficulty is compounded in war‐to‐peace transitions. Using Kosovo as our case study, we highlight the risk of negative trade‐offs between what we call the ‘political’(peace‐building) and ‘functional’(state‐building) dimensions of decentralisation. While quite successful in terms of mitigating tensions between the Albanian majority and Serb minority, decentralisation has contributed little to enhancing cooperation and trust between the two communities and improving local governance. Weak accountability – both formal and social – needs to be addressed to conclude Kosovo's war‐to‐peace transition.