The basic criteria for the formation of a municipality are its preparedness to manage and maintain its environment, municipal economy, to provide communal services to local inhabitants and to perform other functions provided for in the Law on Local Self-Government of the Republic of Lithuania. The county is the higher territorial administrative unit of the Republic of Lithuania, the governing of which shall be organised by the Government of the Republic of Lithuania pursuant to the Law on the Governing of the County and other laws. The county shall be formed out of the territories of the municipalities that have common social, economic, and ethnic and cultural interests. The towns of the Republic of Lithuania, the population of which is less than 3000, regional towns and urban-type settlements which had the status of town, as residential areas shall be considered as towns even after the coming into effect of the Law on the Territorial Administrative Units of the Republic of Lithuania and their Boundaries. Small towns are compactly built up residential areas, the population of which is from 500 up to 3000, more than a half of the working population of which is employed in industry, business and production and social infrastructures, as well as traditional small towns.
Villages are other residential areas having no characteristic features of a town and a small town.
The counties shall be established and abolished, as well as their boundaries and centres shall be set or changed by the Seimas of the Republic of Lithuania on the proposal of the Government of the Republic of Lithuania. The county boundaries must be changed when the number of municipalities or their boundaries change. The territory of the municipality shall not be divided by county boundaries. The municipalities shall be established and abolished, as well as their boundaries and centres shall be set and changed by the Seimas of the Republic of Lithuania on the proposal of the Government of the Republic of Lithuania, taking into consideration the proposals of the local authorities. The names of counties shall be given and they shall be changed by the Seimas of the Republic of Lithuania on the proposal of the Government of the Republic of Lithuania.