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Systems models of the Food–Water–Energy (FWE) nexus face a conceptual difficulty: the systematic integration of local stakeholder perspectives into a coherent framework for analysis. We present a novel procedure to co-produce and systematize the real-life complexity of stakeholder knowledge and forge it into a clear-cut set of challenges. These are clustered into the Pressure–State–Response (PSIR) framework, which ultimately guides the development of a conceptual systems model closely attuned to the needs of local stakeholders. We apply this approach to the case of the emerging megacity Pune and the Bhima basin in India. Through stakeholder workshops, involving 75 resource users and experts, we identified 22 individual challenges. They include exogenous pressures, such as climate change and urbanization, and endogenous pressures, such as agricultural groundwater over-abstraction and land use change. These pressures alter the Bhima basin’s system state, characterized by inefficient water and energy supply systems and regional scarcity. The consequent impacts on society encompass the inadequate provision with food, water, and energy and livelihood challenges for farmers in the basin. An evaluation of policy responses within the conceptual systems model shows the complex cause–effect interactions between nexus subsystems. One single response action, such as the promotion of solar farming, can affect multiple challenges. The resulting concise picture of the regional FWE system serves resource users, policymakers, and researchers to evaluate long-term policies within the context of the urban FWE system. While the presented results are specific to the case study, the approach can be transferred to any other FWE nexus system.