The European Universities Initiative (EUI), created by the European Commission in 2017, is a recent novel phenomenon within the European Union policy toolkit that explicitly targets the development of transnational cooperation in higher education (HE). To date, the EUI counts 44 European university alliances, involving around 340 HE institutions. In this paper, we argue that the EUI can be seen as a case of a transnational institution building process representing a potentially significant structural reform for European higher education. Anchored in new institutionalism, we explore the regulative, normative, and cultural-cognitive dimensions of the EUI. Methodologically, this study analyzes the perspectives of European policy actors (n = 4), a set of policy documents (n = 13) and the mission statements of the EUI's partnerships funded before 2022 (n = 41). The results show that the EUI emerges as the 'next level of cooperation' in European HE since it aims to transform European cooperation (regulative dimension), to create and diffuse a new model for European HE following a challenge-based approach (normative dimension), and to work as a way to reinforce and institutionalize European and global scripts for European HE (cultural-cognitive dimension).