We present a comprehensive analysis of water governance in Guanacaste, Costa Rica. Methods included interviews, workshops, and participatory processes. The study zooms in on water-related rules and regulations, people’s actions, and the physical water system that people depend on. The results indicate complex governance problems and provide focal points for sustainable governance efforts. Focal points include: respecting scarcity and the limits of groundwater availability; building broad governance capacity; reconciling disenfranchised rural groups; and supporting creative local leadership. The study asserts the need for combining critical governance analysis with transformational and solution-oriented research in support of sustainable water governance efforts.