While priority setting for research, development and innovation (RDI) traditionally focuses on which thematic areas should be supported, less is known about how such goals are implemented on the agency level. Key challenges are how to translate broad priorities into programs and projects, how to govern the knowledge base, and how to handle organizational tensions during implementation. Many of these challenges must be addressed by ‘street-level’ administrators and agency experts during implementation. We take these agency challenges to be of central concern for RDI policy implementation, and propose a process perspective on priority setting. We apply this perspective to a case study of the Swedish Energy Agency and highlight a number of insights such as the tension between existing organizational capabilities and new goals for research and innovation. We argue that these insights are particularly relevant to other research funders with a sectoral mandate, for example, health, defense, or agriculture.