As public and private water policies fail to address urban water insecurity in the Global South, community‐based water governance (CWG) has emerged as an alternative. However, systematic understanding of the current state, performance, and future opportunities of urban CWG remains lacking. We critically review literature (75 case studies from 1990 to 2019) on urban CWG in the Global South, focusing on the current scope and status of knowledge; importance, challenges, innovations, and opportunities; and prospects for scaling up CWG to enhance water security in urban areas. Institutional arrangements, scope and complexity, capacity, and outcomes of CWG varied widely. Most case studies showed improvements in water quantity, supply reliability, pricing, community empowerment, employment, reduced nonrevenue water, and financial viability. Community partnerships with nongovernmental organizations, private‐sector agents, public utilities, and donors; technological innovations; and community autonomy were important for financial sustainability, asset security, and service improvements. Many CWG interventions however remained fragmented, limited in geographic scope, and were undermined by poor funding, weak infrastructure and capacity, political interference, overburdening of poor communities, and collective‐action challenges surrounding elite capture, marginalization, and unequal benefit sharing. We argue that these challenges notwithstanding, CWG interventions offer more benefits than failures and remain critical alternatives for urban water security in the Global South. New research is needed to understand the impact of CWG under diverse settings, the role of incentives and financing mechanisms, and how persistent collective‐action challenges including gendered participation and marginalization undermine CWG. This article is categorized under: Human Water > Water Governance Engineering Water > Planning Water