The Colorado River supplies >40 million people in the United States Southwest with their daily water supply and is unable to meet the current demands. New approaches are needed to enhance sustainability and resilience. A net zero urban water (NZUW) approach meets the needs of a given community with a locally available and sustainable water supply, without detriment to interconnected systems and the long-term water supply. Transitioning to a NZUW future will require considerable modifications to governance and policy across the Southwest and its cities specifically. We identify five areas of governance and policy challenges: diversified water sources and sinks; planning, design, and operation; monitoring and enforcement; coordination; and addressing equity and justice. Four case study cities are investigated: Albuquerque, Denver, Los Angeles, and Tucson. Across these cities, the policy priorities include supporting potable water reuse, coordinating policies across jurisdictions for alternative water sources, addressing equity and justice, developing and incentivizing water conservation plans, and making aquifer storage and recovery projects easier and more economical to pursue. We conclude that a NZUW transition in the Southwest faces considerable governance and policy challenges, but moving cities toward this goal is crucial.