There is growing awareness that both the practice and science of participation in water governance continue to suffer from blind spots with regard to questions of power and equity. We present an analytical frame that helps explore how participatory processes initiated by water reforms can better address the needs and interests of marginalized groups. We build on recent arguments about the potential to enrich adaptive governance theory from a critical institutionalist perspective, combining power-sensitive concepts with a multi-level analysis. The key insight advanced is about the potential to apply critical institutionalism to unpack structural obstacles to the participation of marginalized groups in water governance and to illustrate how such obstacles are (re)created by the agency of powerful actors. We draw on two cases: the situations of Black smallholder farmers in South Africa and the Indigenous Sámi people in Sweden, in the context of the participatory water policies they are subjected to. The analysis shows how the agency of powerholders can purposefully block the inclusion of marginalized groups in two very different political and historical contexts and provides important insights into some of the main stumbling blocks that hinder the advancement of an adaptive water governance system in both countries. On this basis, we suggest opportunities to advance this research direction analytically and empirically. Our larger argument is about fundamentally recasting our view on the purpose of participatory processes in water governance; rather than primarily being instruments to deliver specific policy outcomes, they should allow marginalized groups to center their concerns about the structural roots of the experienced marginalization into the water governance discourse. It requires acting upon the right-claims of marginalized groups and re-evaluating dominant narratives of acceptable societal tradeoffs as well as cost-benefit distribution based on the inputs from these groups. Otherwise, powerful actors will continue to co-opt water governance processes to their advantage and use their agency to undermine the effectiveness of participatory initiatives.