Cities worldwide are facing a growing water crisis with challenges from climate change, population growth, and deteriorating infrastructure that threatens economic development, social welfare, and environmental sustainability. New strategies are needed for water/wastewater treatment and distribution that will reduce the need to pump water over long distances and provide opportunities to reuse wastewater locally. A full-scale pilot hybrid sequencing batch membrane bioreactor (SBMBR) wastewater treatment system serving 400 residential units at Colorado School of Mines (Colorado) was used as a case study to assess the technical feasibility of using the SBMBR process as a sustainable approach for onsite water reclamation and reuse of domestic wastewater effluents. The system was first tested in its capability to produce an effluent quality adequate for landscape irrigation applications. Further, the authors examined the applicability of the SBMBR as a decentralize treatment technology in terms of local water demand, infrastructure requirements, energy consumption and environmental impact. The technical challenges related to the operation of the SBMBR were also evaluated. Findings of this study demonstrated that the SBMBR system had the operational flexibility to generate effluent qualities that differed with respect to nitrogen concentrations tailored to local needs. These were generated within a few days without major system disturbances or negative impact on membrane fouling. Similar to other decentralized treatment technologies, the application of the SBMBR for water reuse purposes is challenged by uneven/seasonal local water needs, use-specific distribution systems, and energy requirement for treatment. The largest challenge for implementation of decentralized systems is the need for a much better process control that can lead to "smarter" SCADA systems for remote operation.