The assessment of drought hazards is important due to their socio-economic impacts on water resources, agriculture, and ecosystems. In this study, the effects of drought on changing water area and canopy of the Lake Urmia watershed in the northwest of Iran have been monitored and evaluated. For this purpose, the Standardized Precipitation Index (SPI) was calculated in short and medium periods (1-month and 3-month) to determine the dry-spell periods in the Lake Urmia basin. In reviewing this analysis, the annual average has been examined and evaluated. Furthermore, Moderate Resolution Imaging Spectroradiometer (MODIS) and remote sensing data were used to calculate the Normalized Difference Vegetation Index (NDVI), the Enhanced Vegetation Index (EVI), the Normalized Difference Water Index (NDWI), and the Temperature–Vegetation–Dryness Index (TVDI) to identify the area of water body, water level, and vegetation changes during 20 years (2000–2020). The Pearson correlation coefficient was also employed to explore the relationship between the drought and the remote sensing-derived indices. According to the results of drought analysis, 2000, 2002, 2004, 2006, 2008, 2010, 2012, 2014, 2016, 2018, and 2020 had experienced dry spells in the Lake Urmia basin. The NDWI changes also showed that the maximum area of the Lake Urmia happened in 2000, and its minimum was recorded in 2014. The variation of NDVI values showed that the highest values of vegetation cover were estimated to be 2,850 km2 in.2000, and its lowest value was 1,300 km2 in.2014. The maximum EVI and TDVI were calculated in 2000, while their minimum was observed in 2012 and 2014. Also, the correlation analysis showed that the SPI had the highest correlation with NDVI. Meanwhile, 1-month SPI had a higher correlation than the 3-month SPI with NDVI and EVI. As a concluding remark, NDVI and NDWI were more suitable indices to monitor the changes in vegetation and drought-related water area. The results can be used to make sound decisions regarding the rapid assessment of remote sensing-derived data and water-related indices.