Transformation towards sustainable developmentis about findings new ways of thinking, organising and doingto navigate wicked challenges such as climate change andurbanisation. Such challenges call for new governancemodes that match the complexity of the systems to behandled, where multi-level governance and collaborativeapproaches have been suggested to contribute to suchtransformative capacity building. This in-depth, transdisciplinarystudy investigates how the multi-levelgovernance context in Stockholm, Sweden, influences thetransformative capacity from the perspective of localsustainability initiatives. It was found that even though thedecentralized governance of the Stockholm region hosts agreat potential in supporting city wide transformation, it ishampered by disconnect between actors, levels and sectorsand the short-term funding structure. The suggestedinterventions highlight the tension between enablingcollaborations, while safeguarding a high local diversity ofinitiatives and flexibility to ensure sustained space forinnovation and learning.