In Thunderbird and SeaMonkey, "Local Folders" is the name given to the set of mail folders at the bottom of the folders pane. Many new users don't know what these Local Folders are for, or why they're called "Local Folders". It's called a "special" account because it doesn't have any instructions for how to communicate with a mail server.
Really old versions of Thunderbird used to create all of the standard folders you'd expect in an account in Local Folders but nowadays it defaults to just a Trash and Outbox folder. If you configure a POP account to use the inbox folder in Local Folders (a Global Inbox) it will create the inbox folder if it doesn't already exist. Outbox is a special folder used to queue messages when you use Send Later rather than Send. The Outbox folder is used by all accounts.
Uses for Local Folders
- If you configure a POP account to use a Global Inbox, the new messages are downloaded into a Inbox folder in Local Folders, and the POP accounts folders are hidden in the folder pane.
- When you compose a message and save it to be sent later ("File -> Send Later"), it is saved in the Unsent Messages folder in Local Folders. That folder is also used to send a message in the background if you set mailnews.sendInBackground true.
- Sent newsgroups messages are saved in Local Folders by default.
- You can use Local Folders as a place to archive old messages, so that the actively used mail folders are smaller and less cluttered.
- If you reconfigure several profiles to use a common directory for Local Folders outside of the profile, it's much easier for those users to share mail messages.
- Conversely, if you use an IMAP e-mail account, mail is stored "remotely" (on the server) rather than being downloaded and stored "locally" (on your own computer). Local Folders provides a convenient place to store messages locally when desired. You could use offline folders instead, but that can cause complications and you would need to switch Thunderbird to working offline to access those folders. If you enable auto-save of drafts, it's less likely to interfere with your typing if you store them in Local Folders.
Renaming Local Folders
To change the name of Local Folders, just right click on "Local Folders" in the folders pane, choose "Settings", and then in the dialog that pops up, enter the new name in the "Account Name" field. Alternatively, you can go to "Tools -> Account Settings" (in Thunderbird) or "Edit -> Mail & Newsgroup Account Settings" (in SeaMonkey), then click on "Local Folders" in the left-hand pane, and type in the new name in the "Account Name" field.
Moving the storage location for Local Folders
By default, Local Folders is stored in your profile folder, as a subfolder of the "Mail" folder. See Moving your mail storage location for instructions on how to change where Local Folders is stored.
Getting rid of Local Folders
The best solution is to keep Local Folders collapsed in the folder pane and ignore it.
You could edit the prefs.js file file in your profile folder per  or  to get rid of it. That works, but it requires you to understand how account settings are stored in the prefs.js file and any mistakes can seriously mess up your profile. If you try it, be sure to back up your profile first. Hiding it using an add-on such as Hide Local Folders would be much safer than deleting it.
Local Folders lost during an upgrade
If your local folders are missing after upgrading Thunderbird (and you didn't deliberately get rid of them) set the advanced folder view to All Folders using View -> Folders -> All. If they are still missing something probably deleted its account from the list of known accounts in the mail.accountmanager.accounts setting.
Type mail.accountmanager.accounts in the edit field in the Config editor and see how many account ids it lists. For example if you have two POP accounts and they're set to account4,account3, Thunderbird only knows about two accounts. It should know about three (two POP accounts and one local folders account).
If the count is wrong:
- Back up prefs.js in your profile.
- Search for Local Folders in the edit field in the Config editor.
- It will return about four lines. You want one that has just Local Folders in the right column (value) and looks like either mail.server.server1.hostname or mail.server.server1.name in the left column (preference name). The '1' is the server id.
- Enter server1 (replace the 1 with the actual id you found) in the edit field in the Config editor. Find a setting that looks like mail.account.account1.server that is set to server1. Usually the same id is used for both the server and the account.
- Edit mail.accountmanager.accounts to add the local folders account. You can edit it by double clicking on the value. If the account id was 1 you'd add ,account1 to that setting. For example if it was set to account4,account3 change it to account4,account3,account1
- Exit Thunderbird and restart it.
- Bug report about Local Folders "account" has disappeared from the left hand pane
- Enhancement request to remove Local Folders