Rapid urbanization and climate change are converging challenges in the Global South, creating a complex nexus of environmental stress, institutional failure, and human vulnerability. In emerging regional capitals like Bahir Dar, Ethiopia, this dynamic is particularly acute, yet a comprehensive understanding of the linkages between the city's physical transformation, the capacity of its governance systems, and the impacts on frontline communities is critically lacking. This study, therefore, conducted a multi-dimensional, integrated analysis of the interplay between urban expansion, climate governance, and the livelihood vulnerability of peri-urban communities in Bahir Dar. The study employed a convergent mixed-methods design, integrating remote sensing and geospatial analysis, the development of composite Relative Importance Indices (RII) from expert surveys, one-way ANOVA to test for perceptual gaps, Structural Equation Modeling (SEM), and the Livelihood Vulnerability Index (LVI) framework. The findings reveal a clear and damaging causal chain. First, the analysis of a 40-year period (1984-2024) demonstrated that Bahir Dar’s designation as a regional capital catalyzed an accelerated urban expansion, leading to a 366% increase in built-up areas. This rapid land use and land cover change, characterized by the significant loss of vegetation and agricultural land, directly resulted in the intensification of the Urban Heat Island effect, with a mean Land Surface Temperature of urbanized zones increasing by 6°C over the 40 year study period (1984-2024). Second, the investigation into the institutional response found the city's Urban Climate Governance (UCG) framework to be demonstrably ineffective, with an overall index score (0.489) falling below the functionality threshold 0.50. The evaluation across seven core governance dimensions revealed a system characterized by a single, fragile strength amidst pervasive weakness. While Accountability (RII=0.639) emerged as the sole dimension to surpass the 0.50 effectiveness threshold, it was an isolated strength. All other dimensions, including Participation, Equity, Institutional Capacity, and Adaptability, were found to be critically weak, with Climate Change Law and Enforcement (RII=0.400) representing the most severe point of failure. The ANOVA specifically validated this structural disconnect by identifying a significant perceptual gap in awareness-raising efforts between regional policymakers and local-level implementers. The subsequent diagnostic analysis confirmed that this overall ineffectiveness is primarily driven by a triad of interconnected institutional constraints; a severe deficit in human and institutional capacity, a weak and poorly enforced policy framework, and a lack of sustained political will and leadership. Consequently, the assessment of the human impact showed that peri-urban farming households are in a state of moderate livelihood vulnerability. This condition is defined by high sensitivity, resulting from their dependence on a shrinking agricultural land base, and severely constrained adaptive capacity, stemming from critical deficits in their physical and financial capital. This vulnerability is not an isolated condition but is actively intensified by the unchecked urban expansion and the systemic governance failures identified in the analyses. Collectively, this study concludes that the unmanaged physical expansion of Bahir Dar, enabled by an impaired governance system, is systematically dismantling the resilience of its peri-urban communities. The study recommends a fundamental shift away from isolated policy interventions towards an integrated approach that combines climate-sensitive land-use planning, targeted institutional strengthening, and robust livelihood support programs to build genuine and equitable urban climate resilience.