Challenges of water stress exacerbated by climate change and variability, and unprecedented rapid urbanization pressure are affecting developing cities like Addis Ababa and increasing vulnerability of urban livelihoods. Whilst developing cities do not have a universal conventional water infrastructure (pipes, drains and central treatment facilities) that many Northern cities are trying to break out of, and thus said to have a chance to leapfrog towards more sustainable urban water management. The study is inspired by multilevel and multi-scale governance, transition and livelihood frameworks. Taking the events of a research project known as Water Resilient Green Cities in Africa, exploratory case study methodology applied to investigate and identify the potentials and challenges of transitioning to a water sensitive city in real life context of Addis Ababa. Multiple sources of data used to triangulate the findings. The study uses grounded theory to inquire the applicability of the concepts developed in the context of the Global North. It has also significance in terms of identifying policy gaps and generating useful feedbacks in this crucial time in which case an overall institutional and governance change in Ethiopia is taking place. The study identified a number of layers of institutional frameworks, and the key structural and contextual factors that enable and/or constrain the transition to water sensitive city. The result showed that there are potential, such as opportunities for laying a better foundation fo rdifferent actors to play their competitive role in the transition, and some supportive provisions in policy and legal frameworks. However, overlapping mandates, fragmentation, capacity gaps and limitations in participation are constraining the transition to a water sensitive city. Moreover, the high turnover of staff both among executives and experts presents a barrier to the fostering of champions of landscape-based storm water management (LSM). Local-level champions are needed; however there are structural constraints that impede their emergence. The university as an intermediary can play key role in the transition, but it can also burnout and thus other types of champions are needed. The results also show that livelihoods in examined case studies are heavily affected by water stress. However, there is potential for building waterresilient livelihoods, if broader policy frameworks are bottom-linked with locally specific situations using LSM. Preparation of roadmap, revision of policy and legal frameworks, and introduction of economic tools like payment for ecosystem services are recommended for enabling the institutional transition to a water sensitive city.