Pakistan, with an estimated population of 241.5 million (2023), ranks as the world’s fifth most populous country. Due to an increase in population, Pakistan is facing a serious water shortage, which is affecting people’s lives. Pakistan has 143 large and small water storage reservoirs, with major ones like Tarbela, Mangla, and Chashma collectively holding a storage capacity of 18.92 Million Acre Feet (MAF). Pakistan’s annual water requirement is approximately 1,000 Billion Cubic Meter (BCM), while the current availability is only around 180 BCM, indicating a substantial water deficit. This deficit is expected to grow with population growth and rising water demand in the future. To address this, authorities need to create strong policies for conserving water. In response to the extending challenges posed by rapid urbanization and population growth in Pakistan, this comprehensive research has delved into the necessary task of transforming urban water management for sustainable cities. The objective was to propose an innovative framework that redefines urban planning and governance, integrating smart technologies to ensure the sustainable use of water resources. The rising demand for fresh water can be linked to the growing population. The internet of things (IoT), a technology that connects devices and systems, can play a crucial role. For the urban water management, we utilized IoT sensors for real-time data collection and AI algorithms for internet decision making. IoT sensors and AI algorithms in urban water management improve real-time data utilization, enhancing decision making for efficient urban water resource management.