This article assesses the sustainability potential of the urban water systems in Europe (UWSE) following their modernisation. A decade after implementation and close to the first deadlines, modernisation efforts seem to have not been (totally) successful. This article examines the ability of governance to achieve sustainability and poses the question of how modernisation develops a particular “terrain” more or less favourable to sustainability. We use the Institutional resource regimes framework which has been dedicated to determining the potential for sustainability of natural resources regulation. Conclusions show that the modernisation of UWSEs offers a path for progress which though necessary is insufficient due to a lack of coherence between policy design and the regulatory system. Globally, the development of regulation goes hand in hand with increasing inconsistencies that reduce the efficiency of the reform.