Watershed management has become a prominent approach to natural resource management (NRM) in Australia and elsewhere. In the Australian State ofNew South Wales (NSW), catchment management - the NSW watershed management initiative - has been in place both in coastal and non-coastal areas for nearly two decades. In coastal areas, it is suggested that catchment management could play an important role in coastal and marine issues (NSW Coastcare et aI., 2004; Zann, 1996), as the Australia's coastal and marine environments have, in general, been affected by watershed-based activities (see e.g., Zann, 1996). Such a role would, however, require institutional changes, as catchment management has not been specifically designed to address coastal and marine issues. Furthermore, catchment management itself has been challenging to deliver NRM, even in non-coastal areas. Examining the development of institutional arrangements for catchment management can help developing a better understanding about the conditions necessary to improve current arrangements and the potential challenges to eventual reforms. This paper describes the development of institutional arrangements for catchment management in NSW and its contextual factors, and discusses institutional challenges towards prospective coastal catchment management. Implications from the Australian context provide insights that warrant consideration in other regions and jurisdictions.