Adaptive capacity (AC) plays a prominent role in reducing community vulnerability, an essential goal for achieving sustainability. The related concept, transformative capacity (TC), describes a set of tools from the resilience paradigm for making more fundamental system changes. While the literature appears to agree generally on the meaning of AC and TC, operational definitions vary widely in empirical applications. We address measurement of AC and TC in empirical studies of community vulnerability and resilience, with special attention to the problems of arctic communities. We discuss how some challenges follow from ambiguities in the broader vulnerability model within which AC is embedded. Other issues are more technical, such as a confounding of stocks (capacity) with flows (time-specific inputs or outcomes). We view AC and TC as forms of capital, as distinct from flows (i.e., ecosystem services, well-being), and propose a set of sequential steps for measuring the contribution of AC and TC assets to reducing vulnerability. We demonstrate the conceptual application in a comparative analysis of AC in two arctic Alaska communities responding to an increase in the price of fuel. The comparative case study illustrates some key empirical challenges in measuring AC for small arctic communities.