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This article discusses both the design and implementation of Soziale Stadt program as well as effects of the recent welfare and labor market reforms in terms of the role their activation and participation strategies play in combating social exclusion. In a first section, the context of the transformation of (local) social policies is sketched, highlighting the background of the new geography of social need in German cities as well as the increasing role for civic engagement and local activism in the policies dealing with these needs. The following sections present, in turn, findings from the implementation of the “Social City” program and from the implementation of the new employment policies through nonprofits. In both of these policy fields, the focus on “active citizenship” and “social localism” is found to play a profoundly ambivalent role.