Design policy for innovation and prosperity has been acknowledged and adopted globally. Existing literature on design policy usually adopts a top-down perspective to analyse the components of the design innovation system and ignores the practical needs of practitioners. Our study aims to explore potential opportunities and challenges of design policies for design-enabled innovation from a bottom-up perspective. We firstly discussed the enabling role of design in the context of design as input, output and process of innovation with emphasis on design-enabled innovation conception; then European design policies are reviewed in terms of characteristics, priorities and strategies at EU, national and regional levels. Based on multiple case studies on the SWOT (i.e., Strengths, Weaknesses, Opportunities, and Threats) analysis of 50 European design innovation initiatives, we summarised eight dimensions of SWOT factors—organisation, production, performance, knowledge, environment, market, technology and institution—so as to identify main strengths, weaknesses, opportunities and threats that practitioners are facing, and discussed common and specific factors that might influence the identification of SWOT forces by taking into account country and sector factors. We concluded that European design policy is located at a point of intergenerational transition from awareness raising to capacity building, which calls for more coordinated policies to tackle current opportunities and challenges.