The two groups voted to work together at Powys council
The two largest political groups on Powys council have formed a coalition.
Powys Independent Alliance and the Welsh Liberal Democrats have voted to work together, but will keep their separate identities as groups.
The move could alter the way the decisions are taken and both parties have not ruled out forming a cabinet system.
Currently, the council is ruled by a board which is made up of councillors from a variety of parties.
The coalition, which calls itself Powys Administration, said it would provide "effective political leadership to the council at a time of unprecedented political and financial pressures".
It said it had not ruled out forming a cabinet system of governance, but such a move would have to go out to public consultation.
Michael Jones, chairman of the board and leader of Powys Independent Alliance and Powys Administration, said: "Local councils are going to be under increasing strain over the next few years, with both capital and revenue budgets cut or frozen.
"Already Powys has suffered the lowest settlement in Wales for three years running. At the same time, the council is pursuing important initiatives to rationalise its property holdings, modernise its schools and deliver social care to a growing elderly population.
"At a time of such pressures, it is more important than ever that the council has effective political direction, with the strong leadership that cannot be achieved by minority political groups."
The leader of the Welsh Lib Dems on Powys council and deputy leader of Powys Administration, Leslie Davies, said he was confident the coalition would provide improved political leadership.