In recent decades, urban water governance has undergone profound transformations across social, institutional, environmental, and managerial dimensions. The growing complexity of institutional structures, conflicts among stakeholders’ values and objectives, and the inefficiency of hierarchical and purely technical approaches have challenged traditional water management systems in megacities such as Tehran. Within this context, sustainable water governance is not merely a managerial issue, but rather a deeply institutional, discursive, and multi-logic challenge. Given the inability of conventional models to address these complexities, this study seeks to develop an analytical framework for explaining urban water governance by drawing on institutional logic theory, institutional sociology, and sustainability transition literature. The framework analyzes the interplay between social structures and institutional practices at four levels—strategic, tactical, operational, and reflexive—while examining the role of different institutional logics, namely hydraulic, market-based, and water-sensitive, in shaping policies, decision-making processes, and stakeholder conflicts. Beyond identifying conceptual gaps, the study highlights the need for rethinking decision-making patterns, integrating conflicting institutional logics, and designing adaptive and multi-stakeholder policies in urban contexts. The goal is to provide both theoretical and practical foundations for transitioning toward flexible, participatory, and sustainable water governance in managing Tehran’s urban water system.