There may be two situations when this happens:
- Your garrisoned troops won't level up if there is no training ground in the city/castle or if there is one garrison training is disabled (talk to your steward in the war room dialogue to enable/disable garrison training.
- The troops in your army won't level up if your "training" skill is too low. Increase it when you level up (it depends on the "intelligence" perk). There is also a book that increases tariner skill by two points. If your trainer skill is too low troops will only level up by gaining combat experience much as your player character. So, no kills no XP.
- Oh and don't try to level your troops up if your in the dialogue window with one of the Red Brotherhood brokers. It doesn't work.
Hope that helps.

Actually, you can train your troops only if your level is higher than theirs. Training skill only affects how much xp they gain at midnight, i.e. how fast they level up.
If you want to test if this is really a bug, grab about 10 first tier peasants, go to a training camp and choose sparring practice.

Originally posted by Mihai:

Actually, you can train your troops only if your level is higher than theirs. Training skill only affects how much xp they gain at midnight, i.e. how fast they level up.
If you want to test if this is really a bug, grab about 10 first tier peasants, go to a training camp and choose sparring practice.

That's correct. You can't train/level up troops that have a higher level than your avatar. Though they still will level up (slowly) through garrison training. But you'll probably be at a higher level before you hold a castle anyway.