This dissertation examines state-society relationships in Turkey through the lens of efforts to promote sustainable development at the local level. To this end, it first lays out a theoretical framework to analyze the political economy of local sustainable development, for which purpose the Gramscian state theory and its applications to the political economy of the environment are deployed. The dissertation thus situates the local social-economic-environmental processes within the making of state hegemony and the uneven impacts of state behavior on the society. The dissertation employs two case studies, each based on extensive qualitative study and quantitative data from the administration of representative surveys to operationalize this framework. At both case study sites, Sultan Sazligi and Köprülü Kanyon, the Turkish state made explicit efforts to implement sustainable development through projects funded by the Global Environmental Facility, but failed to do so. In analyzing the reasons for failure, the dissertation documents how the Turkish state's hegemonic practices, interacting with local power inequalities, undercut the implementation of sustainable development. It further reveals how inequalities are perpetuated by the failure of sustainable development and how they, in turn, prove to be impediments on sustainable development implementation at the local level. The dissertation also provides a critical lens through which community-based schemes, including co-governance and participatory management, can be examined. It highlights, in particular, the role of local inequalities and anticipations shaped by the state by conducting an econometric study. It demonstrates the different channels through which exclusion from decision-making operates, impeding the democratic functioning of these institutions and undermining efforts to promote sustainable development.