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This commentary discusses the nexus between the European Union (EU) and the local level of government in light of the contemporary challenge of maintaining social cohesion in European urban areas. Social cohesion is understood as a key element of societal stability, which is increasingly constrained in many urban contexts. Against the backdrop of decision-makers being challenged to find effective governance modes and policies addressing ever more diverse urban populations, the commentary presents evidence on how urban authorities use European funds in addressing social cohesion challenges. Cities’ use of the European Structural and Investment (ESI) Funds in diversity governance has been found to hinge on various factors that are often inter-institutionally determined and that may restrict cities’ possibilities to make most efficient use of the funding. The commentary concludes that more effective and participative forms of multi-level cooperation within frameworks like cohesion policy and the newly established Urban Agenda for the EU are necessary in supporting social cohesion and successful diversity governance in European cities. It further suggests that a reform of EU cohesion policy should entail both conceptual and institutional innovations, allowing for an integration of the intersections of urban diversity and cohesion in policy and fund design and a reinforcement of the partnership principle. [ABSTRACT FROM AUTHOR]