The Lidder watershed, located within the Anantnag district of Jammu and Kashmir, India, is a region of substantial ecological and socioeconomic importance. Over the last two decades, this region has witnessed rapid and significant transformations in land use/land cover (LULC) patterns from 2001 and 2023. This study aims to comprehensively analyze and document the extent, nature, and driving factors of LULC transformations in the Lidder watershed, and to underscore their far-reaching ramifications for environmental sustainability and human well-being. The study employed advanced geospatial technologies, including remote sensing, GIS, and organized field investigations. Significant transformations in the LULC composition of the Lidder watershed were examined. A marked decrease of 62.5 km2 in agricultural land was observed, contrasted by a substantial expansion of 96 km2 in the horticultural sector during the study period. This shift in LULC priorities appears to have been driven by economic incentives and changing climatic conditions. Additionally, critical LULC categories, including forest cover, snow cover, shrublands, and water bodies, have exhibited consistent declines. Forest cover has been subjected to deforestation and degradation, primarily due to the intensification of anthropogenic activities, such as urbanization, agricultural intensification, and unregulated tourism. The decline in snow cover is a result of the increasing effects of climate change, as rising temperatures have accelerated glacial retreat and seasonal snowmelt. Furthermore, the reductions in water bodies raise concerns about the availability of water resources, essential for ecological stability and human livelihoods. These regional transformations have been propelled by multifaceted drivers, including economic, climatic, and demographic factors. Economic shifts, including the transition from subsistence agriculture to cash-crop horticulture, have been influenced by market demands and policy interventions. Simultaneously, demographic pressures arising from population growth and increased migration to the watershed area have intensified demands for land and resources. Climate variability has further compounded these challenges, exacerbating stress on natural ecosystems and undermining the region’s capacity to adapt to environmental changes. The observed LULC changes pose substantial threats to environmental sustainability, human health, and food security.