The city of Kolkata in India is undergoing rapid urbanization and expansion. As the city expands and engulfs its neighboring areas, it threatens the sustainability of natural resources in peri-urban areas – spaces that are gradually transitioning from rural to urban areas. One such natural resource, groundwater, forms the lifeline of peri-urban communities near Kolkata, supporting their drinking, domestic, and livelihood needs. However, under conditions of rapid urbanization, industrialization and population growth, peri-urban areas witness over-exploitation of the groundwater resource. Limited capacity of formal government bodies to manage the resource coupled with ongoing trends of decentralization in India provide the basis for exploring new ways of managing groundwater in peri-urban areas. One such approach is community-based management (CBM) where local communities can craft rules and norms to sustainably manage a resource. This research studies two peri-urban areas near Kolkata to understand the groundwater problems faced by peri-urban communities, how they respond to these problems, and what challenges they face in resolving their problems. First, the Socio-Ecological Systems (SES) framework developed by Elinor Ostrom and her colleagues is used to structure and highlight the factors critical for managing groundwater in peri-urban areas. Next, the overall performance of CBM is evaluated using Ostrom’s design principles and 10 second-tier SES variables proposed by Ostrom (2009). The research shows that peri-urban communities at best cope with problems of groundwater scarcity or seek short-term solutions to delay periods of scarcity. The results from this evaluation show that although community-based management is a good strategy in theory, its realization in peri-urban areas will need to overcome barriers such as low predictability of the groundwater resource, lack of community-wide leadership, low autonomy to craft rules for groundwater management, and varied mental models.