Contrary to developed countries, developing countries have been observed to have an increased reliance on a diversity of water supply options to meet their daily demands, where formal supply systems are incapable of fulfilling the daily needs of consumers. In filling a demand-supply gap, informal supply systems are increasingly being associated with issues of long-term sustainability, higher consumer cost, and inequity. Emerging formal-informal dynamics in developing countries require a thorough understanding of complex human-water interactions for policy direction, in order to best support the advancement of urban water sustainability. Accordingly, system archetypes offer a platform to explain the behaviors of complex systems. This paper identifies common system archetypes that define urban waterscapes in the developing world. In this way, Causal Loop Diagrams (CLDs) are used to present relationships and identify common archetypes that define the complexity of urban water supply systems in Hyderabad, Pakistan. These archetypes include ‘fixes that fail’, ‘shifting the burden’, ‘limits to growth/success’ and ‘growth and underinvestment’. These archetypes demonstrate that increases in formal infrastructure capacity and the number of informal suppliers to increase supply reliability are symptomatic solutions, restrained by financial and technical resources, and thus have unintended consequences. Further, a number of policy instruments are discussed as leverage points to achieve financial sustainability of formal systems. This paper emphasizes the need of a policy framework for informal supply system in national and regional water policies to ensure its service reliability as a short to medium term solution.