Institutions play an important role in shaping individual incentives in complex social-ecological systems, by encouraging or discouraging resource overuse. In the Gulf of California, Mexico, there is widespread evidence of declines in small-scale fishery stocks, largely attributed to policy failures. We investigated formal and informal rules-in-use regulating access and resource use by small-scale fishers in the two most important fishing communities of the Midriff Islands region in the Gulf of California, which share several target species and fishing grounds. The Midriff Islands region is a highly productive area where sustainable use of fisheries resources has been elusive. Our study aimed to inform policy by providing information on how management and conservation policies perform in this unique environment. In addition, we contrast attributes of the enabling conditions for sustainability on the commons in an effort to better understand why these communities, albeit showing several contrasting attributes of the above conditions, have not developed sustainable fishing practices. We take a novel, comprehensive institutional approach that includes formal and informal institutions, incorporating links between land (i.e., communal land rights) and sea institutions (i.e., fisheries and conservation policies) and their effects on stewardship of fishery resources, a theme that is practically unaddressed in the literature. Insufficient government support in provision of secure rights, enforcement and sanctioning, and recognition and incorporation of local arrangements and capacities for management arose as important needs to address in both cases. We highlight the critical role of higher levels of governance, that when disconnected from local practices, realities, and needs, can be a major impediment to achieving sustainability in small-scale fisheries, even in cases where several facilitating conditions are met. © 2014 by the author(s).