While national agencies increasingly adopt ‘sustainable’ rhetoric, their policies frequently prioritize bureaucratic legitimacy over local landscape realities. This research examines how Thailand’s development policies shape water and spatial governance in riverine landscapes, focusing on Chiang Mai Province and the Phaya-Kham irrigation system. Despite ambitious sustainable development objectives, implementation is marked by institutional silos, overlapping mandates, and scalar misalignments, resulting in fragmented governance that favors short-term economic gains over long-term ecological health. These dynamics undermine water resource management and exacerbate socio-ecological inequalities. Drawing on archival reviews, policy analysis, mapping, and interviews, the study employs political ecology perspectives and David Mosse’s framework of policy performance to investigate the disjuncture between policy intentions and on-the-ground realities. The Phaya-Kham system illustrates how modernization pressures, urban expansion, and agricultural intensification destabilize community-based water governance. Findings underscore that governance challenges in Chiang Mai are fundamentally political, rooted in struggles over authority and resource control rather than technical shortcomings. Sustainability-oriented policy frameworks may reproduce socio-ecological degradation. Achieving fairer water and landscape governance requires confronting these dynamics, integrating local knowledge, and fostering inter-agency cooperation. By recognizing context-based hydrosocial territories, policies can move toward more socio-environmentally healthy frameworks supporting local riverine communities and landscape realities.