Small towns lag behind cities in drinking water and sanitation access globally. Closing this gap requires developing service models for areas with both urban and rural characteristics. This study assessed Bushenyi-Ishaka, a municipality in Uganda situated at the rural-urban transition, with a focus on service ladder indictors. Data sources included household interviews (n = 500) and water quality samples from sources and storage containers. Households in more urban (as compared to rural) cells were more likely to use improved water sources (including piped water on-premises), make regular payments for water, rely on shared sanitation facilities, and make use of manual sludge emptying services. Most households (72%) used an unlined pit latrine not intended for emptying and reuse. These findings suggest that small town servicing models should prioritize non-sewered sanitation management, including incentives for safe excreta containment and disposal opportunities. This study also highlights a need for integrated services models to expand rural-urban water and sanitation coverage.