Abstract Rapid economic development has significantly degraded the environmental quality of Erhai Lake and its basin. In order to assess the present sustainability of Erhai Lake Basin and suggest improvement options, this study builds an emergy-based framework, in which the whole basin system comprises five sub-systems divided according to local economic structure and lake functions, including Erhai Lake sub-system, Fishery sub-system, Agricultural sub-system, Industrial sub-system and Household sub-system. Moreover, emergy performances of lake water consumption are analyzed considering the vital role of lake water in the basin development. The results of emergy-based indicators, e.g. EYR (1.31), ELR (60.98), ESI (2.15E-02) and support area SA(r) (1.56E+05 km2, about 60 times the actually available area), reveal that the whole basin is far away from sustainable development. The key factor is the strong reliance on nonrenewable resources, especially in the form of purchased resources (76.48% of total emergy used). In particular, cement industry and transportation equipment industry within the industrial sub-system, as well as massive use of chemical fertilizers and pesticide in the agricultural sub-system, are the main contributors to the overall emergy inputs. e Regarding to water consumption, agriculture is the dominant sector by volume, but with a low use efficiency, while industrial water use has the largest environmental impact due to its high water quality requirement. Policy insights for improving the overall sustainability of Erhai Lake Basin are proposed, including adjusting industrial structure and promoting circular economy, facilitating green agriculture, improving water efficiency and increasing renewable energy use.