The study claims to show the Assembly and local government are working together to develop a distinctive style of intergovernmental relations within Wales.
Furthermore, it asserts that the Welsh Assembly has not affected local government discretion and benefits from its political support and professional expertise.
The Joseph Rowntree Foundation, which compiled the independent report, said Assembly members are more favourably inclined towards local government than
Despite having to work within the constraints of the England and Wales policy systems, the Welsh Assembly, which only has secondary legislative power unlike the Scottish Parliament and Northern Irish Assembly, does have complete discretion in determining its budgetary priorities.
The report outlined two key issues for councils in Wales: money and discretion. It said devolution had not led to a significant increase in local government's share of the Welsh spending cake.
It noted local spending discretion had been significantly 'eroded' by central government under both Conservative and Labour governments.
But now the Assembly had slowed this erosion making less use of specific grants than central government does in vital areas of spending such as health.
The Assembly should build on policy agreements, the report said, have 'better strategic vision' and improve its consultative processes.
A spokesman for the Welsh Local Government Association fully endorsed the findings of the report, stressing the positive relationship between it and the Assembly.
He said: 'The effective relationship is enhanced through the partnership council.'
He added the ending of ring-fencing in finance, the introduction of policy agreements and the increasing role of local government in the NHS in Wales were all examples of how they were co-operating effectively.
But the report also outlined some lessons for local government which included strengthening mediating organisations such as the WLGA and bolstering the role of elected members.
The WLGA spokesman added that many of those points had already been addressed.