<p>In Indonesia, the advent of decentralization marked a profound politico-economic transformation from a centralized authoritarian government in 1999. After more than two decades, Indonesian urban studies have overlooked the relationships between regional economic growth and environmental consequences, especially in the context of fiscal decentralization. We hypothesized that variations in fiscal decentralization and capital expenditure lead to higher land surface temperature at the local level, highlighting the need for tailored urban environmental policies. Using six metropolitans on Java Island—Jakarta, Bandung, Cirebon, Jogjakarta, Semarang, and Surabaya—this study examined the effects of two components of fiscal decentralization, intergovernmental transfer funds and capital expenditure, on the urban environment between 2014 and 2022. The environmental quality was approximated by Land Surface Temperature (LST) obtained from the Google Earth Engine (GEE) platform. Structural breaks analysis and panel fixed-effect regression were also performed. Evidence of structural breaks due to the pandemic and mixed effects of intergovernmental transfer and capital expenditure on urban temperature were revealed. These findings contribute to the literature by providing empirical evidence on the role of fiscal decentralization and urbanization on variations in urban temperature.</p>