Many cities in the Global South lack the capacity to provide water security to their inhabitants. Peri-urban areas are especially vulnerable to water insecurity. This study concerns the impact of (good) governance on water security among formal and informal settlers residing in Hlaing Thar Yar Industrial Zone (HTIZ), a peri-urban area belonging to Yangon, Myanmar. Through employing mixed methods, we investigate the dynamics of water security by studying the governing processes which shape it on a local level. In HTIZ, various challenges related to water security come together. Our findings reveal that water security in HTIZ was achieved for the majority of the formal settlers, whereas this was not the case for the majority of the informal (riverbank) settlers. Although a well-organized needs-driven system of local water vendors supplied water to the local population there was a high risk of contamination by domestic pollution (e.g., Escherichia coli) and industrial effluent, in addition to the relatively high price of the water. The identified water insecurities were driven on an institutional level by the lack of capacity and priority given to supplying and protecting informal settlers. Absence of environmental monitoring and enforcement, and the perceptions of government officials further exacerbated water insecurity.