Urban development and poverty alleviation efforts in the Global South, such as slum upgrading, have been transformed by policy shifts toward more decentralization, reduced state control, and greater civil society and community participation in local governance. The Slum Networking Project (SNP) in Ahmedabad, India, is an internationally recognized “best practice” in participatory slum upgrading. We illustrate how changing the nature of multi-stakeholder participation in the SNP affected its potentials for sustainability and scaling up. Stakeholder ability to alter the institutional arrangement resulted in a significant transfer of project implementation responsibility and authority from the state to nongovernmental organizations (NGOs). Although these stakeholder-initiated institutional innovations initially expedited and expanded SNP and made it more sustainable, we argue that the enlarged role for NGOs in the current institutional arrangement can limit the program’s potential for further scaling up.