This article examines the determinants of coalition formation on the local level. In addition to standard office- and policy-seeking variables, we incorporate the local institutional setting and the constraints on local coalition politics emerging from patterns of party competition at the superior level of the political system. We test our expectations on the basis of a dataset providing information on the characteristics of potential and formed coalitions in 29 German cities. The results show that – even on the local level, which is often described as less politicised – not only office-seeking variables but also the ideological positioning of parties are good predictors for local coalition formation in German cities. Additionally, our findings suggest that local political actors take the party affiliation of the directly elected mayor into account when forming coalitions in local councils. The findings imply that political actors on all levels of political systems try to maximise their payoffs and form coalitions accordingly.