India’s 74th Constitutional Amendment obliges state governments to devolve responsibilities related to urban environmental resources and services to the Urban Local Bodies. However, the existing literature points to deficiencies in urban decentralization, including a mismatch between resources and responsibilities, financial constraints, and a lack of capacities at the municipal level. This article, based on comparative fieldwork and analysis of environmental governance in four small cities in Gujarat and West Bengal, two states representing contrasting subnational political regimes, largely confirms the literature on urban decentralization, but it also shows important differences between the two states. Municipal governance reflects state-level regime types to some extent: While an efficient local and parastatal bureaucracy spearheads investments in environmental infrastructure in Gujarat, relatively autonomous elected municipal councillors in West Bengal guide a widely spread creation of small environmental assets. The availability of more untied funds at the local level in Gujarat than in West Bengal leads to more pronounced intra-state variation and opens possibilities for more substantial municipal agency.