The hierarchical clustering inherent in Lambda-Cold Dark Matter cosmology (ACDM) seems to produce many of the observed characteristics of large-scale structure. But some glaring problems still remain, including the over-prediction (by a factor 10) of the number of dwarf galaxies within the viriaUzed popidation of the local group. We carry out a detailed calcination of the dwarf halo evolution incorporating the effects of a hypothesized dark-matter decay, D → D' + 1, where D is the unstable particle, D' is the more massive daughter particle and l is the other, Ughter (or possibly massless) daughter particle. This process preferentially heats the smaller halos, expanding them during their evolution and reducing their present-day circidar velocity. We find that this mechanism can account very well for the factor 4 deficit in the observed number of systems with velocity 10-20 km s-1 compared to those predicted by the numerical simulations, if δm/mD' ̃ 5-7 × 10 -5 , where δm is the mass difference between the initial and final states. The corresponding Ufetime τ cannot be longer than ̃ 30 Gyr, but may be as short as just a few Gyr.