Bologna, Italy, with its history of good governance, progressive welfare policies, community work, and participation has engendered powerful discourses informing policy and institutional innovation. Yet, a recent city-wide mixed-method action-research (AR) project, designed to document and tackle health inequalities, showed a significant North–South divide for a range of health indicators and an unequal distribution of social determinants of health across the most socio-economically deprived city areas. The AR project also examined the potential of the city’s initiatives for community development and health promotion in addressing health inequalities.In this paper, we focus on a recent institutional innovation called ‘Uffici reti e lavoro di comunità’ (Network and community work units, NCWUs), established by the Bologna municipality in 2016 to promote the decentralization of powers, strengthen community networks, and foster the engagement of citizen organizations in taking care of the material and social living environment. The results of the AR project indicate that the NCWUs, whilst not designed as a policy initiative to reduce (health) inequalities, have a potential to do so by supporting more effective community action to address the determinants driving those inequalities. Through a critical re-thinking of the concepts of power and participation, they also suggest promising directions to overcome some of the limitations of community development approaches in contributing towards greater well-being and equity for people and communities, underlining local learning which could be applied across different geographies nationally and internationally.