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Problem statement. The relevance of the topic is due to the need to increase the capacity of local self-government bodies to effectively respond to modern socio-economic challenges in the context of decentralization, post-war recovery and European integration of Ukraine. The formation of innovative functionality of local self-government bodies is the main prerequisite for digital transformation, sustainable development of territorial communities and improving the quality of public services. The purpose of the article is to form the functionality of local self-government bodies regarding the use of innovations. Methods used in the study: systematization and generalization, tabular, grouping, etc. The hypothesis of the study was the assumption that the formation of the functionality of local self-government bodies regarding the use of innovations should take place within the framework of the development of the strategy for the development of the territorial community. Summary of the main material: it is substantiated that the formation of the functionality of local self-government bodies on innovations is a necessary prerequisite for increasing the capacity of territorial communities for sustainable development, recovery and adaptation to modern socio-economic challenges. It is proved that the effective implementation of innovation policy at the local level requires institutional consolidation of the relevant functionality through the creation or strengthening of specialized units, introduction of positions of innovation managers and expansion of the powers of local self-government bodies in the areas of digital transformation, economic, energy and spatial innovations. The strategic goal, operational task, activities, expected results, indicators, responsible persons and the period of formation of the functionality of the innovation unit are determined on the example of the Feodosia rural territorial community in the areas of development. As well as five interrelated areas, indicators of achievement, sources of verification and basic assumptions that ensure the possibility of their successful implementation. It has been established that the innovative functionality of local self-government bodies should be comprehensive and include analytical, strategic, communication and educational components, as well as mechanisms of partnership with business, scientific institutions and international organizations. This approach ensures not only the attraction of financial and knowledge resources, but also improves the quality of managerial decisions and the level of public trust. The originality and practical significance of the study lies in the consolidation of methodological approaches to assessing the coherence of MED and the restoration of socio-economic infrastructure. Conclusions. The development of innovative functionality of local self-government bodies requires proper regulatory and legal support, integration of innovation priorities into community development strategies and implementation of systems for monitoring and evaluating the effectiveness of innovation initiatives. Further research consists in approbation of the developed recommendations.This article was prepared within the framework of the research topic "Comprehensive scientific research of the investment and innovation determinant of sustainable economic development of Ukraine" on the basis of the agreement No. BF/C22-2025 on the implementation of scientific research concluded with the Ministry of Education and Science of Ukraine, at the expense of budget funds aimed at ensuring the conduct of scientific research and scientific and technical (experimental) developments by state scientific institutions based on the results of state certification.