The article is devoted to the study of challenges and prospects of the reform of territorial organization of local self-government as the problem, which has become relevant in the context of the upcoming new law on local self-government regulation. Recently, some experts have been expressing concerns about the final transition to a homogenous system of local self-government in Russia, which will be expressed in the abolition of urban and rural settlements. The declared goals of the reform, among which there are an increase of budgetary independence and reduction in the cost of local administration maintenance, are criticized, but at the same time there is still a lack of thematical practice-oriented research. Therefore, the study examines actual results of transformation of territorial organization of local self-government in the Moscow region as an example of a region, where all municipalities were granted the status of urban districts before the end of 2019. The study is based on a theoretical framework, which is centered around public choice and economies of scale theories. A hypothesis is drawn that the spread of urban and municipal districts may lead to a decrease in the territorial accessibility of local self-government followed by no reduction in the cost of its maintenance. The pre- and post-reform values ​​of indicators, characterizing territorial accessibility of local self-governments and its services and the volume of expenses connected to local self-government maintenance are compared. Conclusions are drawn about the negative impact of the reform: the availability of local authorities and local services for citizens is declining, while there are no visible budgetary savings due to staff cuts.