The water environment is critical to maintaining ecosystem balance and human well-being globally. It is essential to comprehend the effects of land use change on water quantity and quality for sustainable development of the urban environment. Expansion of urban areas leads to intensified human activity and increased pollution loads in natural waterbodies. This study aimed to monitor changes in land use over a span of two decades to evaluate the condition of the water environment in That Luang Marsh (TLM). The land use and land cover (LULC) classes, including agricultural land, bare land, built-up land, vegetation, waterbody, and wetland, were categorized via Landsat images utilizing the maximum likelihood algorithm. A digital elevation model was used to estimate the water surface area and volume, and the nutrient delivery ratio model was employed to analyze nutrient distribution across the LULC classes. The results showed that from 2001 to 2020, the bare land, built-up, waterbody, and wetland areas increased by 29.92, 18.64, 0.87, and 0.16 times, respectively, while the agricultural and vegetation land decreased by 0.80 and 0.76 times, respectively. A binary logistic regression model for influential factors implies that road network expansion within the special economic zone in TLM could result in an increase in residential areas, thereby impacting the LULC classes. The increase in water volume showed a robust correlation with the expansion of built-up land, bare land, and waterbody. TLM had an average nitrate-nitrogen export of 317 tons/year with a 95% confidence interval of (56, 770) tons/year in 2020. The distribution over LULC classes affected the export, which varied dynamically. Vegetation land had the highest nitrate-nitrogen load of 0.57 tons/ha/year, probably due to poorly managed use of fertilizers. The developed land surface for an artificial lake could lead to an increase in the water volume, which could be involved in the dilution of nutrient concentration. Therefore, it is crucial to prioritize policies that aim to establish sustainable urban water environments through rational urban planning and by making LULC management a primary consideration, especially for developing countries undergoing similar processes of urbanization along the Mekong River in Southeast Asia.