In the face of climate change, urban governance systems must adapt to uncertainties and emerging pressures. Polycentric governance, characterized by multiple decision-making centers at different scales, enables coordination across levels and provides flexibility, which allows for experimentation and context-specific action, catalyzing institutional innovations in cities. These innovations involve creating new structures and modifying existing ones to help cities better withstand and adapt to the impacts of climate change. There are plenty of studies on this issue in developed country context, but such studies in the context of developing countries are lacking, especially in India. This article aims to explore the influence of polycentric governance on institutional innovations, thereby offering insights on how it contributes to transformative urban governance in India, characterized by (1) stewarding capacity, (2) unlocking capacity, (3) transformative capacity, and (4) orchestrating capacity. The research findings suggest that polycentric governance increases diversity and autonomy in decision-making centers across levels, which can enable more innovation or flexibility, leading to improving governance capacity to respond to changing circumstances, but these developments are still in nascent stage and further research is needed to assess the long-term sustainability of these capacities. The findings not only contribute to governance research and provide insights for policymaking, but also contribute to the broader discourse on urban resilience and sustainable development aligning with SDG 11 (sustainable cities and communities) and SDG 17 (partnerships for the goals) globally, especially in the Global South.