Macao has entered a transitonal period since the PRC and Portugal signed a joint statement on Macao on April 12, 1987, The PRC takeover of Macao on December 20,1999 is less than two years away, but three important problems during the transitional period, i.e, making Chinese the official language, localization of laws, and localization of public servants, have remained unresolved. The main obstacle to these problems' solution is the issue of locally-born Portuguese, because they have played a major role in the past and will also have a major orle to play in the future. If the issue remains unsettled, the above problems will never be truly resolved. In this article, the author discusses the definition of locally-born Portuguese, their social status, their predicaments, and possible solutions so as to faciliate a better understanding of Macao affairs.