<p>The western region of China is characterized by abundant coal resources but scarce water resources, and underground reservoir systems have been proposed to mitigate this mismatch. However, during the operation of these reservoirs, fluctuating water levels cause coal pillar dams to be prone to damage due to the combined effects of in-situ stress and water immersion. In this study, cyclic loading-unloading experiments and nuclear magnetic resonance tests were performed on coal samples with varying immersion heights to investigate their mechanical behavior. The results showed that immersion leads to the mechanical properties exhibiting a trend of “short-term strengthening followed by significant weakening”. Unsoaked coal samples exhibited brittle characteristics, while immersed samples showed ductile behavior, with stress fluctuations after reaching peak load. Pore structure analysis revealed that higher immersion heights caused significant damage, with micropores evolving into mesopores and macropores, weakening the mechanical strength of the coal samples. The interaction between water and coal revealed a “compaction strengthening—damage softening” mechanism: at lower immersion heights, water infiltration created micropores that buffered external loads, resulting in compaction strengthening. At higher immersion levels, however, deeper water penetration triggered physicochemical interactions, generating macropores and microcracks that reduced mechanical strength. This study provides both macroscopic deformation-failure analysis and microscopic mechanistic insights into water-induced damage, aiming to enhance the stability and safety of coal pillar dams in underground reservoir systems.</p>