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In his retrospective review for AllMusic, William Ruhlmann gave the album four and a half out of five stars, noting that Knopfler's "intricate, introspective finger-picked guitar stylings make a perfect musical complement to the wistful tone of Bill Forsyth's comedy film." Ruhlmann continued, "The low-key music picks up traces of Scottish music, but most of it just sounds like Dire Straits doing instrumentals, especially the recurring theme, one of Knopfler's more memorable melodies."

Rolling Stone magazine's contemporary review called Knopfler's film music debut an "insinuating LP of charming, cosmopolitan soundtrack music—a record that can make movies in your mind."

For the Local Hero soundtrack, Knopfler received a BAFTA award nomination for Best Score for a Film.

"Going Home" is played at Newcastle United F.C. and Aberdeen F.C. home games as the football players run out onto the pitch, as well as at the end of games at other clubs.

1. The Rocks & The Water 3:30
2. Wild Theme 3:38
3. Freeway Flyer 1:47
4. Boomtown (Variation Louis' Favourite) 4:06
5. The Way It Always Starts 4:00
6. The Rocks & The Thunder 0:45
7. The Ceilidh & The Northern Lights 3:57
8. The Mist Covered Mountains 5:13
9. The Ceilidh: Louis Favourite Billy's Tune 3:57
10. Whistle Theme 0:51
11. Smooching 4:58
12. Stargazer 1:31
13. The Rocks & The Thunder 0:40
14. Going Home: Theme Of The Local Hero 4:55