The wetland ecosystem and its driving mechanism are significance impact on the ecological environment and the sustainable development of semi-arid regional economy. Agricultural and industrial land use/land cover change (LUCC) is also important for wetland system. The Daihai wetland (DW) in Inner Mongolia has been suffering from severe environmental problems such as water resource shortages and wetland areas decrease. We analyzed spatiotemporal LUCC at the catchment scale of Daihai Lake, which has recently exhibited a dramatic loss of water area, and investigated the potential role of climatic changes and human activities in the wetland loss. From 1976 to 2015, the arable land and construction land increased by 71.72 and 15.81 km2, with ranges of 18.72% and 39.61%, respectively. Meanwhile, the wetland area decreased by 84.47 km2, accounting for 29.07% of the area in 1976. From 1960 to 2015, the area of Daihai Lake decreased by 100.73 km2, diminishing to 37.09% of the area in 1960, and the lake storage accordingly shrank from 12.9 × 108 to approximately 3.9 × 108 m3. The lake level also rapidly declined. From 1962 to 2014, the lake water mineralization, total nitrogen (TN), and total phosphorus (TP) increased by 2410, 7.86, and 0.182 mg L−1, respectively. The pollution sources included not only mineral fertilizers and pesticides, but also livestock, poultry breeding, aquaculture, and rural household waste. The lake area decreased with increasing agricultural development, Daihai power plant (DHPP) water consumption, and catchment climatic dryness. Thus, the urgent implementation of effective restoration and mitigation measures are needed.