Providing reliable and affordable wastewater treatment in rural areas is a challenge in many parts of the world, particularly in developing countries. The problems and limitations of the centralized approaches for wastewater treatment are progressively surfacing. Centralized wastewater collection and treatment systems are costly to build and operate, especially in areas with low population densities and dispersed households. Developing countries lack both the funding to construct centralized facilities and the technical expertise to manage and operate them. Alternatively, the decentralized approach for wastewater treatment which employs a combination of onsite and/or cluster systems is gaining more attention. Such an approach allows for flexibility in management, and simple as well as complex technologies are available. The decentralized system is not only a long-term solution for small communities but is more reliable and cost effective. This paper presents a review of the various decentralized approaches to wastewater treatment and management. A discussion as to their applicability in developing countries, primarily in rural areas, and challenges faced is emphasized all through the paper. While there are many impediments and challenges towards wastewater management in developing countries, these can be overcome by suitable planning and policy implementation. Understanding the receiving environment is crucial for technology selection and should be accomplished by conducting a comprehensive site evaluation process. Centralized management of the decentralized wastewater treatment systems is essential to ensure they are inspected and maintained regularly. Management strategies should be site specific accounting for social, cultural, environmental and economic conditions in the target area.