Lao PDR, a landlocked country in the lower Mekong River basin of Southeast Asia, has been considered a global biodiversity hotspot with a high level of biological endemism. In recent years, urban development and industrialization have affected the water quality of freshwater ecosystems in Lao PDR. However, the assessment of water quality in the country is primarily focused on a physicochemical method, while the application of a multimetric index (MMI) approach using benthic macroinvertebrates for biomonitoring in rivers and streams has not been established. MMI, based on benthic macroinvertebrates, is a biomonitoring tool that considers the effects of multiple anthropogenic impacts on benthic macroinvertebrate metrics associated with their biological attributes (e.g., taxa richness, composition, pollution tolerance, habits, and functional feeding) and aggregates individual metrics into a single value for assessing the water quality and health conditions of aquatic ecosystems. Here, we developed an MMI based on macroinvertebrate communities collected during 2016–2018 from 10 localities of streams and wadeable rivers in Lao PDR. Of the 54 potential metrics tested, 35 candidate macroinvertebrate metrics representing richness, composition, trophic structure, habit, and tolerance to pollution were selected, while 19 metrics were excluded. Of the 35-candidate metrics, a total of 11 core metrics (Total taxa, EPT taxa, Ephemeroptera taxa, %Diptera, %Plecoptera, %Tolerant, Beck’s biotic index, %Intolerant, Filterers taxa, %Sprawlers, and %Burrowers) were finally selected for the development of MMI based on their sensitivity, redundancy, and easy-to-apply tool for the biomonitoring program. These metrics can be used to distinguish the reference (seven sites) from stressed conditions (seven sites). In addition, the final MMI scores classified 40 sampling sites into four classes of water quality, including excellent (25%), good (10%), fair (60%), and poor (5%), which the conventional physicochemical method could not clearly distinguish. The Lao MMI developed in this study is an effective tool for evaluating the water conditions of sites affected by human activities, particularly agricultural areas, and, thus, is appropriate for use in future studies for assessing the ecological conditions of rivers and streams in the Mekong region.