The success of public organizations depends increasingly on how efficiently they utilize internal and external knowledge resources in adjusting to contextual changes. This requires a special emphasis on strategic knowledge management. Referring to the theoretical and empirical works of Nonaka, Blackler, Daft and Lengel, this contribution considers how organizational design can be used to facilitate the processes in which knowledge is gathered, created, processed, used and demolished in order to build an enriched knowledge base to deal with adjustment and development issues of strategic importance. This theme is discussed with special reference to local government. The main conclusion is that uncertainty and ambiguity increased in the last decades of the 20th century, and that local governments need new management tools to respond to this change. The challenge of knowledge management in local government is to manage knowledge processes concerning ICT-based information provision, interaction and transactions. They are needed to form an enriched knowledge-intensive orientation base that serves the strategic adjustment and trend-making processes in the context of information society development.