It is an Urban Local Body that administers a city of population 200,000 or less. Under the Panchayati Raj system, it interacts directly with the state government, though it is administratively part of the district it is located in. Generally smaller district cities and bigger towns have a Nagar Palika.

The members of the Nagar Palika are elected representatives for a term of five years. The town is divided into wards according to its population and representatives are elected from each ward. The members elect a president among themselves to preside over and conduct meetings. A chief officer, along with officers like an engineer, sanitary inspector, health officer and education officer who come from the state public service are appointed by the state government to control the administrative affairs of the Nagar Palika.

An urban centre with more than 30,000 and less than 100,000 inhabitants is classified as a Nagar Panchayat.