Central Business Districts (CBDs) are impeccable areas of traffic attractions exacerbated by the increase of rapid population density, enormous urbanization, and increasing economic and commercial activities. Traffic congestion in the CBD areas is a perpetual problem for sustainable urban development. This study detailed the traffic congestion states and the factors influencing traffic congestion in the CBD areas of Khulna City. In this regard, spot speed, journey speed, running speed, and volume of all types of vehicles in the four CBD areas during peak and off-peak hours on both weekends and weekdays have been measured through manual counting and video recording methods. The traffic congestion state in the study area has been assessed through Level of Service, Speed Performance Index, Road Segment Congestion Index. The outcome of these indices revealed the worst congestion state in all CBD areas with breakdown flow. The Active Road Performance Index explained that inadequate parking facilities, illegal road occupancy by roadside vendors, and on-street parking decreased the road efficiency by 32 to 82% in different areas. The regular road users believed that congestion occurs mostly between 6.00 PM and 9.00 PM. This study found that rapid increase in vehicle population, poor public transport, pedestrians’ behavior, illegal road occupancy, and fragile enforcement of laws are leading the traffic condition of Khulna towards an unsustainable future. The outcome of this study will provide useful information for urban planners, policymakers, and practitioners to devise appropriate strategies for reducing congestion that would help to ensure a sustainable urban transport system.