Transformation towards sustainable development is about findings new ways of thinking, organising and doing to navigate wicked challenges such as climate change and urbanisation. Such challenges call for new governance modes that match the complexity of the systems to be handled, where multi-level governance and collaborative approaches have been suggested to contribute to such transformative capacity building. This in-depth, trans-disciplinary study investigates how the multi-level governance context in Stockholm, Sweden, influences the transformative capacity from the perspective of local sustainability initiatives. It was found that even though the decentralized governance of the Stockholm region hosts a great potential in supporting city wide transformation, it is hampered by disconnect between actors, levels and sectors and the short-term funding structure. The suggested interventions highlight the tension between enabling collaborations, while safeguarding a high local diversity of initiatives and flexibility to ensure sustained space for innovation and learning.