We present a novel report of abundance of halophilic Vibrio alginolyticus with thermotolerant and enterotoxigenic characteristics from community water system of an inland-focus of India causing diarrheal outbreak as an index pathogen. Though, Vibrio alginolyticus causing diarrhea after exposure to marine water and consumption of seafood was reported globally, its existence in non-saline drinking-water sources with pathogenic viability was unknown. A 'matched-pair-case-control' study identified the primary source of V. alginolyticus infection as 'tap-water' distributed by the municipality, used for drinking (MOR: 8.33; 95% CI 2.51-27.6) and household chores (MOR: 3.75; 95% CI 1.24-11.3). Cardinal toxin gene 'tdh' and other pathogenicity markers viz.tlh, vppC, toxR, VPI, T3SS1 and sxt were detected in V. alginolyticus isolates. Expression potential of the hemolytic genes are demonstrated by hemolysis assay and transcriptome analysis. Altogether 30.55% of isolates exhibited strong hemolytic potential in vitro. RT-PCR revealed uninterrupted virulence gene expression in outbreak strains under heat stress. Surprisingly, ~ 100% of V. alginolyticus from the outbreak focus were sensitive/partially sensitive to all group of antibiotics except β-lactums, carbapenem and quinolones. High drug-sensitivity suggested lack of previous human gut exposure and indicated a fresh dissemination from the environmental niche to the community domain. The maximum likelihood phylogeny depicted multiple clades in V. alginolyticus strains from Pan India sources. Isolated outbreak strains shared common ancestry with the strains from nearby riverine system, a source of 'drinking water' supplied to the affected community, confirming its environmental origin. V. alginolyticus, traditionally a fish-pathogen, is steadily gaining an emerging epidemiological relevance alongside other waterborne diarrheagenic bacteria and its 'thermotolerant' attribute poses additional threat under the canvas of climate change.