Community organizing with government support, termed local self-governance (LSG), is a form of policy decentralization for community wellbeing through solutions tailored to local issues. One form of LSG is multifunctional autonomy, in which citizens can comprehensively manage their communities with government support. This study clarified the effect of multifunctional autonomy on healthy life expectancy by assessing related advantages and challenges in rural Japanese communities, using a mixed-methods approach. Disability-free life expectancy from 65 years (DFLE-65) was assessed to compare healthy life expectancies between two rural Japanese cities (with/without multifunctional autonomy). Comparisons revealed better DFLE-65 only among older men in a city with multifunctional autonomy. A cost-effectiveness analysis investigated the relationship between the budget and DFLE-65 change using questionnaire data. Cost-effectiveness analysis of multifunctional autonomy indicated 61,147 yen/DFLE-65. Thematic analysis revealed that multifunctional autonomy created new roles for older men, improving community relationships. However, sustainable multifunctional autonomy in LSG communities may be hindered by a generally aging society, generation gap, and lack of mutual understanding between rural communities and local governments. To ensure the sustainability of multifunctional autonomy, collaborations between local communities and governments and among various generations are critical.