The goal of ensuring water availability and sustainable management of water for all by 2030 is one of the top priorities of the UN-SDGs. The fragile institutional capabilities induce the transitioning towards the sustainable urban water paradigm to accommodate the complexities and uncertainties. This research methodically draws sustainable water management strategies to achieve water security after a critical literature review, trends and policy analysis, and scenario modeling of the study area. First, research systematically illustrated the analysis of unmet water demand and coverage during the study period (2015–2030) and evaluated the impact of external factors such as population growth, living standard, and climate change on the current water system of the Kathmandu Valley. The results showed that future water demand is likely to reach 765 MLD by the year 2030 from the estimated current demand of 388.1 MLD. Also, external factors will increase the pressure on the current water supply–demand systems, and hence exacerbate the water stress but result showed the negligible impact of climate change during the study period. The research explored the significance of “Melamchi Water Supply Project (MWSP)” and found that the effective implementation of MWSP will decrease the unmet water demand by 56–66% in the valley. In the second part, comparative analysis of different management strategies under four future scenarios (optimistic, moderate I and II and business-as-usual) were carried out. The comparative analysis revealed that the proposed optimal management strategy (under optimistic scenario) would lead to achieving 100% of water demand coverage by year 2027.