•The Singapore state changed its strategic role in engaging with foreign universities.•Singapore moved from importing global knowledge to fostering local skill formation.•More recently set up offshore campuses are more embedded in local skill formation.•Offshore campuses with high levels of embeddedness serve specifically local functions. With operating offshore campuses, universities perform key education and training functions in regional economies worldwide. Few studies have acknowledged universities’ expanded role in knowledge and skill formation as both local providers and transnational managers of education and training. Not enough is known about the embedding of transnational universities in local skill formation and varying levels of embeddedness, as well as about the role of hosting states therein and consequences for local economies. This paper addresses this gap in the context of the city-state of Singapore, exploring how skill development at foreign universities has been locally embedded, and why this embeddedness of offshore campuses in local skill formation has changed over time. Empirical evidence is drawn from semi-structured interviews with managers of foreign university subsidiaries. It is found that the Singapore state has changed its role in engaging with foreign universities, from a first phase of importing ‘global’ knowledge in teaching and training to a second phase of strengthening ‘local’ knowledge and skill formation. With being distinctively more embedded than older offshore campuses, recently established subsidiaries perform specifically ‘local’ functions in Singapore’s progressing knowledge-based transformation project. The paper provides better understanding of varying/changing levels of offshore campus embeddedness and the interconnections between changing roles of the state, integration of foreign universities and regional development. A further contribution lies in presenting a conceptualisation of offshore campuses with high levels of embeddedness, helping shed light on the dynamics in local skill formation and in foreign actors’ functions for the regional economy more generally.