Responding to an ongoing disconnect between higher education institutions (HEIs) and contemporary challenges communities face worldwide, universities can become a driving force to strengthen communities’ capacity toward innovative solutions to the challenges they face. This article introduces an analytical framework that provides a roadmap to design, examine, and measure the potential contributions of community-engaged university education in strengthening local capacity for community development (LCCD). The framework proposes three pillars of analysis: community assets, functioning capacity, and transformational capacity. Better understanding the contribution of community-engaged university programs in strengthening LCCD can create the conditions for local communities to leverage their power to foster positive social change while universities reexamine the way they engage communities. Finally, the article discusses implications for social development actors involved in promoting local capacity development to strengthen democracy and civic engagement and the benefits of involving HEIs as key stakeholders for social development.