Damming and water regulation creates highly modified rivers with limited ecosystem integrity and resilience. This, coupled with an ongoing global biodiversity crisis, makes river restoration a priority, which requires water reallocation. Coupled human–natural systems research provides a suitable lens for integrated systems’ analysis but offers limited insight into the governance processes of water reallocation. Therefore, we propose an analytical framework, which combines insight from social–hydrological resilience and water reallocation research, and identifies the adaptive capacity in highly modified rivers as the capacity for water reallocation. We test the framework by conducting an analysis of Sweden, pre-and post-2019, a critical juncture in the governance of the country’s hydropower producing rivers. We identify a relative increase in adaptive capacity post-2019 since water reallocation is set to occur in smaller rivers and tributaries, while leaving large-scaled rivers to enjoy limited water reallocation, or even increased allocation to hydropower. We contend that the proposed framework is broad enough to be of general interest, yet sufficiently specific to contribute to the construction of middle-range theories, which could further our understanding of why and how governance processes function, change, and lead to outcomes in terms of modified natural resource management and resilience shifts.