Objectives: The role and significance of local communities and participation in rural, urban development and planning is increasing throughout the world day by day. UNICEF in cooperation with the municipality and City Council of Bam are trying to establish the city of "Dustdare-E-Kudak" (Child-Friendly City) in the quake-hit city. The plan will involve citizens’ sustained participation in planning and decision-making processes, management, executive tasks, assessment, supervision, and distribution of benefits within local communities. Since the nature of a local community depends on the social capital which, in turn, relies on the neighbors’ networks in urban areas, it was necessary for the level of local and social capital in the city of “Dustdar-E-Kudak” (Child-Friendly City) to be determined both qualitatively and quantitatively, and the weaknesses be identified and, accordingly, the necessary planning and required measures be taken. The present article is the result of a research aimed at gaining this basic and necessary goal. Methodology: The study is a survey research in which data were collected by means of standardized interviewing (questionnaire), in which questions were mostly based on Likert Scale and suitable for Bam’s setting. About 1417 subjects were involved in the research, of whom, 288 above the age of 15 from both genders, were selected through Stratified Random sampling and finally were given interviews. The five following factors were considered for social capital: social participation (formal and informal/ traditional and modern), interactive norms, social trust (inter-personal, generalized, institutional and governmental). It should be noted that the validity and reliability of the research were acceptable. For reliability of the test, Cronbach’s alpha, and for validity of the research, formal and construct validity were used. Findings: The state of social capital’s components in the target area is generally average. The index of participation was divided into two dimensions: objective and subjective. The subjective participation among citizens was low and the objective participation was average. Applying the hypothetical testing of U Mann-whitney, we also showed that there is significance difference between the average formal objective participation with informal objective participation, and traditional objective participation with modern objective participation. In other words, objective participation in formal and modern forms is low, whereas objective participation in informal and traditional forms is average. Descriptively speaking, traditional participation is high and new participation is low, and participation in informal participation is far more than participation in formal participation. The social capital’s internal relationships were tested through Spearman’s Coefficient of correlation, and participation, the basis for a local community, was considered as the dependent variable. Positive and significant relationship between the index of norm (strength of correlation = 0.31) and the index of trust (strength of correlation =0.33), and also the negative and significant relationship between the sense of powerlessness (correlation = -0.45) with the social participation were confirmed. The results of the regression equation are as follows: Interaction0/13+ social confidence 0/23+ sense of powerlessness 0/34 = social participation 1/60 Conclusion: If a local community is a network made up of individuals having interactions with each other and generally living in a single area, then social capital is something which creates and objectifies that local community (like an interacting group with a local identity). Therefore, for creating local communities based on the residents’ stable participation in the city of “Dustdare Kudak” (Child-Friendly City) in Bam, it was necessary to identify the potential for social capital, particularly social participation as well as the factors affecting participation in the questioned area, and to plan accordingly. So, the findings indicates that: here are necessary capacities for establishing local communities however, there is little inclination on the individuals’ part towards civil, modern, organized institutions and some forms of subjective participation which can be disruptive. To promote participation we should consider such factors as reducing the sense of powerlessness, raising trust and interactive norms among the citizens of the city of “Dustdar-E-Kudak”. To cover the weaknesses and to promote participation, methods like “participatory problem-solving workshops”, “local meeting”, “local training” can be used.