Water scarcity presents a critical challenge in arid regions, demanding innovative approaches to sustainable water management. This study investigates the potential of Water-Sensitive Planning (WSP) and Water-Sensitive Urban Design (WSUD) to address water stress in India’s arid zones, where rapid urbanization, land-use change, and groundwater depletion have intensified resource constraints. The research evaluates conventional and contemporary water management practices, identifies region-specific challenges, and proposes sustainable solutions at the building, street, and city levels. Using systematic content analysis of technical, economic, and policy dimensions, the study uncovers key opportunities and barriers to implementing water-sensitive strategies in arid urban environments. It emphasizes that strategic urban planning, integrated with nature-based infrastructure and demand-side management, can significantly enhance water security while supporting ecological balance. The research highlights the importance of context-specific adaptations, institutional coordination, and active community participation in developing resilient and inclusive water systems. By providing evidence-based insights, this paper contributes to the global discourse on sustainable water management and offers a framework for policymakers and planners to balance urban development with long-term water conservation. Ultimately, the findings support climate resilience and environmental sustainability in arid regions.