The country is a representative democracy in the form of a constitutional monarchy headed by the Grand Duke Henri. The role of the Duke, however, is largely ceremonial. In practice the country is governed by the Cabinet of Ministers who exercise the executive power and by the Parliament which represents the legislative power in Luxembourg. The Cabinet of Ministers includes the Prime Minister, who serves as head of government. The Prime Minister is the leader of the political party or coalition of parties having the most seats in Parliament, known as the Chamber of Deputies. The members of the Chamber of Deputies are elected to a 5-year term. A second body, the Council of State (Conseil d'Etat), is composed of 21 ordinary citizens appointed by the Grand Duke, which advises the Chamber of Deputies in the drafting of legislation. However, the Council’s opinions have no binding effect.

The Grand Duchy is administratively divided into three districts, which are in turn divided into Cantons, Communes and Municipalities. Communes are administrative authorities possessing legal personality and administrating their patrimony. A Communal Council (Conseil Communal) is directly elected by the inhabitants. A Commune is administered by the mayor and the alderman (Collège des bourgmestres et échevins) chosen from the Communal councillors.