Several frameworks, concepts and indicators have been developed in the past decades to help policy makers and water managers improve the sustainability of urban water systems, but overall progress has been slow. Water-related challenges have been increasing, with the number of cities suffering from lack of access to safe water and sanitation expected to soar, exacerbated by population increases and dwindling availability. While it is widely acknowledged that these challenges require systemic solutions to address them in a more integrated way, the concept, in current urban water literature, remains ambiguous. Here, we examine the potential of systems thinking in addressing urban water challenges and review the shortcomings of conventional paradigms and current management practices. System thinking allows for understanding of the web of interrelations that create these challenges and rethinking assumptions about how change happens. We highlight its potential to empower policymakers, water managers, urban planners and other stakeholders to address the root causes of urban water challenges, to shape and influence the broader enabling environment and conditions for the uptake of sustainable practices leading to the sustainability transformation of urban water systems.