Urban water systems face multiple challenges related to future uncertainty and pressures to provide more sustainable and resilient modes of service delivery. Transitioning away from fully centralized water systems is seen as a primary solution to addressing these urban challenges and pressures. We first review the literature on advantages, potential risks, and impediments to change associated with decentralized water system. Our review suggests that adopting decentralized solutions may advance conditions of sustainability and resilience in urban water management. We then explore the potential to incorporate decentralized water systems into broader urban land use patterns that include underserved residential neighborhoods, mixed-use developments, and industrial districts.