Cox’s Bazar, Bangladesh, is known for its unique coastal biodiversity and growing tourism industry; now under pressure with huge water management problems like over-extraction of groundwater, water salinity intrusion, and pollution. These are further aggravated by climate change and urbanization, which impact the availability of freshwater resources and the surrounding environment. This research aims to assess the environmental constraints that are hampering sustainable water management in Bangladesh’s coast and seek to explore potential for the future through the identification of adaptive and innovative water management strategies. This study applied a mixed-methods approach that included field surveys, interviews of local stakeholders, and secondary data analysis. Both qualitative and quantitative approaches were used to assess the current state of water management practices, their impacts on coastal biodiversity, and the role of tourism in these issues. Results validate that water management policies unsustainable, driven primarily by urbanization and tourism, have resulted in significant environmental damage. Nearly 48% of survey respondents reported dissatisfaction with current water management and identified outstanding water pollution (58%), over-extraction (70%), and climatic change (64%) limitations. The over-extraction process was associated with freshwater loss (66.4%) and salinization (52.8%). Adopting integrated water resource management, ecosystem restoration, and climate adaptation, with stronger governance and community engagement will guarantee sustainable water management and coastal biodiversity conservation.