The influence of Investor-State Dispute Settlement (“ISDS”) on energy transition has sparked significant debate among commentators. While ISDS can theoretically protect sustainable investments from political risks, investors have extensively used it to challenge states’ energy transition policies. Against this backdrop, this paper tackles a critical yet overlooked question in the literature: how exactly has ISDS interfered with governmental regulatory activities concerning energy transition? It examines all ISDS cases involving energy transition issues up to 2023 and analyzes the regulatory measures at stake, the legal grounds for disputes, and the reasoning of investment tribunals. It identifies two notable problems: the lack of effective exceptions in treaties to justify energy regulation and the “polarized” application of the fair and equitable treatment standard. It further proposes reform for international investment law, including strengthening the role of domestic energy laws, balancing investment attraction and regulatory autonomy by selectively employing different types of exception clauses, and narrowing down the scope of the fair and equitable treatment standard.