This paper presents a comprehensive evaluation of potential failure modes under earthquake loads and the development of seismic fragility curves for the Koyna dam under normal operating conditions. Initially, a two-dimensional finite element model of the dam-reservoir-sediment-foundation (DRSF) system is developed. Material non-linearity is introduced to the dam and foundation using the Concrete Damaged Plasticity (CDP) and Mohr–Coulomb models, respectively. The dam and foundation are modeled using 4-node plane strain elements, while the reservoir domain utilizes 4-node acoustic elements. Coupling between the acoustic and structural mediums is established through a surface-based coupling method. Site-specific ground motion records are selected for non-linear time-history analysis. Dynamic structural analysis is conducted via cloud analysis to assess various failure modes of the dam. Finally, fragility curves are developed, considering crest displacement and tensile crack failure as engineering demand parameters. The identification of vulnerable failure regions and the development of fragility curves contribute significantly to risk mitigation and improving dam safety.