Living labs are increasingly popular in discussions on co-creation, destination design and education, particularly with regards to their potential to deal with so called ‘wicked’ problems. However, the living labs concept is ill-defined and critical practitioners warn that this undermines the potential of living labs and may lead to inflated expectations. This article seeks to provide more clarity on living labs, the kind of work that can take place in them and the depth of insights that they can deliver. We provide a taxonomy of different lab environments and the different purposes that they can serve within a tourism context. Based on experiences in two urban tourism living labs in the Netherlands, it is argued that living labs are not suited for solving wicked problems per se, and that greater modesty is required when discussing their potential. The paper concludes with a critical discussion and avenues for further research on the possibilities and limitations of using living labs to facilitate innovation in research and higher education practice.