Droughts have damaging impacts on human society and ecological environments. Therefore, studying the impacts of climate variability and human activity on droughts has very important scientific value and social significance in order to understand drought warnings and weaken the adverse impacts of droughts. In this study, we used a combined drought index based on five Gravity Recovery and Climate Experiment (GRACE) and GRACE Follow-On solutions to characterize droughts in the Pearl River basin (PRB) and its sub-basins during 2003 and 2020. Then, we accurately quantified the impact of climate variability and human activity on droughts in the PRB and seven sub-basins by combining the hydrometeorological climate index and in situ human activity data. The results show that 14 droughts were identified in the PRB, particularly the North River basin with the most drought months (52.78%). The El Niño-Southern Oscillation and the Indian Ocean Dipole were found to have important impacts on droughts in the PRB. They affect the operation of the atmospheric circulation, as well as the East Asia summer monsoon, resulting in a decrease in precipitation in the PRB. This impact shows a significant east–west difference on the spatial scale. The middle and upper reaches of the PRB were found to be dominated by SM, while the lower reaches were found to be dominated by GW. Human activity was found to mainly exacerbate droughts in the PRB, but also plays a significant role in reducing peak magnitude. The sub-basins with a higher proportion of total water consumption experienced more droughts (more than 11), and vice versa. The Pearl River Delta showed the highest drought intensification. Reservoir storage significantly reduces the drought peak and severity, but the impact effect depends on its application and balance with the total water consumption. Our study provides a reference for analyzing the drought characteristics, causes, and impacts of sub-basins on a global scale.