The concept of urban living labs (ULLs) has in recent years influenced not only local government practices but also research approaches. Yet, existing studies have mostly conceptualized ULLs as a mode of governance. Complementing this perspective, this paper analyzes how research funding that encourages ULLs shapes funded projects and, consequently, their potential to inform policy–practice transformations contributing to urban sustainability transitions. Fifteen projects on urban accessibility and connectivity, funded by JPI Urban Europe, are analyzed through a critical review of the call text, project applications, and project reports, supported by interviews, questionnaires, and validation seminars. The paper, which adopts a sustainability transitions perspective, identifies four key mismatches between the transformative ambitions of the funding call and the realized scope of the projects: persistent power imbalances, innovation bias, limited strategic and tactical activities, and under-theorization of core concepts and urban contexts. It further illustrates how these mismatches reflect the requirements set by the funding call. The contribution to the literature on ULLs is threefold: the analysis highlights the role of ULLs as a research methodology, identifies limitations of this methodology as currently operationalized, and illustrates how research funding structures contribute to these limitations. The findings underscore the need for more flexible and democratic ULL funding calls that accommodate a broader spectrum of research approaches, ensure significant local stakeholder involvement throughout the entire project lifecycle, and place greater emphasis on cumulative knowledge production and clearly articulated impact logics.