This paper focuses on water governance and presents a portion of the findings of a larger comparative study of institutional adaptation to climate change or water scarcity in the South Saskatchewan River Basin of western Canada and the Elqui River Basin in northern Chile, two large, regional, dryland water basins with significant irrigated agricultural production. The paper links the community vulnerability paper of Diaz to an assessment of the adaptation capacity of water institutions assessed through primary and secondary research of key representatives from relevant institutions with a water governance mandate. The goal of the study was to develop a systematic, integrated and comprehensive understanding of the capacities of institutions to formulate and implement strategies of adaptation to climate change risks and the forecasted impacts of climate change on the supply and management of water resources in dryland environments. The objectives of this portion of the study were to identify the role of governance institutions in mediating locallevel adaptations to climate and water stress, to assess the capacity of formal institutions to change and make necessary institutional adaptations so that the governance arrangements will be better-equipped to address future vulnerabilities, and to investigate and improve the understanding of the interface among governance institutions in addressing these vulnerabilities. The methodological approach was based on the concept of vulnerability as a function of both the exposure (or sensitivity) and adaptive capacity of a system to respond to stress from multiple exposures including environmental, social, economic and political factors. Effective tools are thus aimed at addressing all of these factors, also known as “mainstreaming.” Community level vulnerability assessments incorporating both social and natural science insights have been conducted in various contexts in Canada and internationally, but there are few examples of integrating community-level vulnerability assessments into policy in a meaningful way. Water governance in Chile is defined in the national constitution. A principle driver of water management relates to water rights as a market commodity. This affects the capacity of formal governance institutions to address water conflict and competing demands. In contrast, water is not mentioned in the Canadian constitution. Water management is the mandate of Canadian provinces, but roles are often shared between multiple orders of government (federal-provincial-local). The plethora of government organizations each of which claim to have some role in water management, are not always clear, are sometimes confusing and can be difficult to manage, creating challenges for regional and local decision-makers. While the governance models in Canada and Chile come from different paradigms, future climate-induced water stresses are expected to require future institutional adaptations to address community vulnerabilities. Flexibility, timely decision-making and clarity of roles will be necessary by all orders of government, and will need to recognize increasing efforts towards proactive integrated water resource management approaches. Based on the research to date, this paper will conclude with its findings of the institutional capacity to adapt to water scarcity or climate change predictions for the area and with policy recommendations for the future to improve adaptive capacity.