Integrated Water Resources Management (IWRM) forms the widely accepted ecosystem approach to manage water and its related resources in a sustainable way. Nevertheless its implementation is still lacking behind, especially in developing and transition countries which are often short of essential resources and face complex political dynamics. IWRM often requires a fundamental realignment of institutions and governance structures. This may lead to problems of fit and institutional interplay as particular challenges of multi-level governance. Against this background a case study of Mongolia was carried out, a transition country suffering from extreme climatic conditions and increasing depletion of its resources. While an attempt to introduce IWRM exists on paper, it is less clear how it will be made politically and institutionally applicable. A document review and stakeholder interviews were carried out in order understand progress and problems of introducing IWRM in Mongolia in the face of its transition and decentralization process. Problems of fit and interplay were identified as well as approaches for their solution. Results show that the decentralization itself has led to problems of fit and interplay. Attempts are underway to overcome problems of fit like the establishment of river basin councils which do now face challenges concerning their room for manoeuvre. Problems of interplay arise when it comes to the cooperation and coordination of numerous water related organisations which often leads to inconsistent water governance. Newly established posts are often endowed with little resources for enforcement.