Floating islands in Lake Victoria, the world’s second-largest fresh water lake, disrupt transportation, fisheries, irrigation, and water quality. Despite their impact, the dynamics of these islands remain unexplored. This study investigates island dynamics within the Nalubaale, Kiira, and Bujagali dams in Uganda, exploring the causes of their formation and the subsequent impact on hydropower production. The study collects data of Landsat imagery from 2000 to 2020, CHIRPS precipitation, and Lake Victoria’s water level datasets from 2004, 2010, 2013, 2017, and 2020. The results reveal a strong correlation between precipitation, fluctuating water levels, and floating island formation, with nutrient-rich runoff from municipal waste and agriculture promoting island growth. In addition, rising water levels lead to the dislodging of rocks and soil, contributing to floating island formation, which may manifest with a lag time of up to one month. The analysis shows higher correlations between precipitation, water levels, and floating islands during the long (March–May) and short (September–November) rainy seasons as opposed to drier periods (June–August, December–February). The findings indicate that southeast monsoon winds, which transport floating vegetation, also are essential in influencing island dynamics. Consequently, the major drivers of floating islands in Lake Victoria are identified as precipitation, water level fluctuations and wind variations. Finally, a negative correlation between floating island eutrophication and power production at Kiira and Nalubaale stations suggests that the increased eutrophication caused by the presence of floating islands leads to reduced power output at both Kiira and Nalubaale power stations.