The benefits of open data for helping to address societal problems and strengthen communities are well recognized, and unfortunately previous studies found that smaller communities are often excluded from the current data ecosystem because of existing technological, technical, cognitive, and practical barriers. This study aims to investigate the process of communitiesʼ data use for community development and decision‐making—focusing on the opportunities and challenges of data for communities. From the interviews with 25 staff from community‐based organizations (CBOs) in nine small, medium, and large cities in the United States, the findings of this study describe dataʼs role in supporting communitiesʼ development while reporting several major challenges that hinder CBOs data use: difficulty accessing data, limitations of open data (un‐local nature, excluding essential data from being open), limited data capacity (especially in data literacy skills), and difficulties using and accessing existing data infrastructures. Our findings suggest opportunities for addressing these challenges, particularly by creating educational programming, building partnerships within data ecosystems, and bringing community voices forward in current data ecosystems, which are critical to realizing dataʼs potential for all citizens.