The Lancaster Sewer District was established in 1967 by a special act of the Massachusetts General Court, the Legislature. The act calls for the formation of a body government within the boundaries of the Town of Lancaster. This means that although the District occurs within the Boundaries of the Town of Lancaster it is completely separate from it. The District is essentially a completely separate government entity from the Town of Lancaster. The Districts governing authority, it's elected Commission, works with the Town of Lancaster to assure that mutual goals are met but the Commission has no authority over the Town nor does the Town have any authority over the Commission.

Utility districts of many sorts, such as sewer and water districts, are established in this way because it is thought that the essential utilities that they provide are typically too specialized to be rolled into a local government. Additionally, often the financial burden of establishing a utility district is too much to bear for a local government while special grants and loans are more readily available for a separate and new utility.

The LSDC is governed by a form of representative government led by a three member board of Commissioners.

The Commission is a composed of three members, a Chairman, a Clerk, and an Associate Commissioner. Each is elected by the voters of the District to a serve three-year staggered terms and must maintain residency within the District. Generally one Commissioner is up for election each year at the annual District meeting although vacancies may be filled from time to time by a special election. Immediately following the election, at the next regularly scheduled Commission Meeting, the Commission holds an organizational session where the Commissioners vote to decide which members of the Commission will be the Chairman and Clerk for the upcoming year.

In addition to the individual Commissioners the Commission office is staffed by a District Billing Clerk, a District Inspector, and a District Administrator all appointed by the Commission.