This chapter explores the multifaceted roles that universities play in peripheral regions using the case of the Portuguese region of the Algarve. The Algarve is a peripheral region with a relatively unbalanced economy heavily reliant on services and particularly the tourist sector. Regional innovation strategies in the Algarve, and particularly the most recent strategy for smart specialisation, have stressed the need to diversify the regional economy. In this context the university of the Algarve is seen as potentially playing a key role in supporting innovation processes, economic restructuring and connecting the region to the knowledge economy. The university has had an active role in the recent wave of innovation policies around Research and Innovation Strategy for Smart Specialisation (RIS3). This chapter reflects upon the tensions and challenges faced in this process, more specifically between the pursuit of traditional missions/global excellence and contributing to upgrading the local business knowledge base. The chapter identifies some of these challenges and discusses potential resolutions and ways forward for the region.