Background and Objective: A transformation to healthy, equitable and environmentally sustainable food systems is required as part of efforts to improve human and planetary health. Local governments in Australia vary widely in the extent to which they are addressing this issue, with a lack of comprehensive and cohesive action. This study aimed to develop and apply a tool for local governments to benchmark their policies for creating healthy, environmentally sustainable and equitable food systems against global and local best practice. Methods: The Local Food Environment Policy Index (Local Food-EPI) tool and application processes were developed in collaboration with local government policy makers. We used existing accountability tools, refined through an extensive literature review and detailed input from an international and local expert advisory panel. In 2022, the tool was piloted in one Victorian local government to test its feasibility, usability, reliability, and the perceived value of the tool from a local government perspective. In 2023, the tool will be applied in 10 Victorian local governments, informing refinement of the tool for broader uptake. The tool consists of 61 indicator statements across 25 policy areas spread across 10 food policy domains. Pilot implementation of the tool identified the assessment process as reliable, feasible and helpful in guiding policy development at the local government level. Local government stakeholders perceived the tool and processes as beneficial in: building knowledge and staff capacity in this area; developing networks; assessing local strengths and weaknesses; and advocating for change Conclusions: The Local Food-EPI tool is a comprehensive method to assist local governments in benchmarking their actions to improve food systems, and prioritising areas for action. Further assessment of local governments using the tool will identify and share knowledge of best practice, monitor policy progress, build capacity and collaborations, and strengthen efforts to increase accountability for change.