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This paper presents a critical review of the physical impacts of decentralized water supply systems on existing centralized water infrastructures. This paper highlights the combination of centralized and decentralized systems, which is referred to as hybrid water supply systems. The system is hypothesized to generate more sustainable and resilient urban water systems. The basic concept is to use decentralized water supply options such as rainwater tanks, storm water harvesting and localized wastewater treatment and reuse in combination with centralized systems. Currently the impact of hybrid water supply technologies on the operational performance of the downstream infrastructure and existing treatment processes is yet to be known. The paper identifies a number of significant research gaps related to interactions between centralized and decentralized urban water services. It indicates that an improved understanding of the interaction between these systems is expected to provide a better integration of hybrid systems by improved sewerage and drainage design, as well as facilitate operation and maintenance planning. The paper also highlights the need for a framework to better understand the interaction between different components of hybrid water supply systems.