A report released by The Millennium Ecosystem Assessment in 2005 explicates the interdependence of healthy ecosystems and societal well-being because of the multiple services ecosystems provide human communities. Still, development practices and land uses continue to degrade hydrologic systems and water quality on which humans depend for services like drinking water, stormwater regulation, and recreation. Decisions at the local level have the greatest impact on water resources. Landowner compliance with regulations, enrollment in cost-share or easement programs, and perhaps most important, voluntary adoption of sustainable land use practices are fundamental to the future of water resources in Illinois and nationwide. Furthermore, local governments have a central role in promoting, incentivizing and regulating sustainable development and land use practices at a watershed scale. Three questions emerge: (1) What drives communities to engage in sustainable watershed management? (2) What constrains communities from engaging in sustainable watershed management? (3) How can resource professionals, policy-makers, and citizens build community capacity to protect watershed health? This paper investigates these issues, presents a theoretical model of community capacity for sustainable watershed management, and describes “lessons learned” about the roles human communities play in watershed management. The insights presented are based on an extensive literature review, empirical research, and ongoing dialogue with water resource professionals and policy-makers across the Midwest. Most notably, a lack of organizational capacity including problems with coordination and long-term visioning in community planning is identified as a primary constraint.