This paper analyzes theoritically and empirically the role of informal sectors on the local economic development. In general, the local governments do not put the informal sectors as a focus of the local economic development. Regular data collection regarding to the informal sectors is almost unavailable. This paper derives a method in analysing the role of the informal sectors in local economy by combining quantitative (non survey) and qualitative (survey) method. Input-Output (IO) Table analysis is applied. Survey (Delphi method) is conducted to get the information about the contribution of the informal sectors. This information is used to derive the Input-Ouput Table (IO*) which put into account the role of the informal sectors. Therefore, some parameters (multipliers and linkages) calculated from IO and IO* are compared. This paper applies the method to look at Daerah Istimewa Yogyakarta (DIY) as a case study. Some conclusions are withdrawn in the case of DIY: first, the informal sectors give a positive contribution to local economic development in terms of output, income, employment and sectoral linkages. Second, the role of informal sectors has to be limmited in some certain level.