Abstract: Democracy, good governance and development are all interrelated. Democratic environment is as essential to good governance as it plays role in sustainable development. Bangladesh is a young eveloping country in the adventure of democracy. Limited resources, ever increasing population along with corruption and social unrest lead its economic development in threat of a great challenge. In this study good governance and institutionalization of democracy is argued from different corner to lead the country in proper direction. In this study attempt is made to present the theoretical structure of the inter-relationships between democracy, good governance and development. It is found that democratic environment helps to nurture good governance and development and in reverse lower income is no longer any obstacle to democracy and good governance. Study of developed and developing countries has been done to present the link between good governance, democracy and development. Attempt is made to identify the obstacles of good governance in Bangladesh and finally policy recommendations are made in light of the results of the study.