Ousteri Lake is one of the important wetlands in India, harbouring many different types of flora and providing a suitable habitat for many different fauna, being declared as a sanctuary in October 2008. The National Wetland Conservation Program of Ministry of Environment and Forests identified Ousteri Lake as a nationally important wetland, and the Bombay Natural History Society (BNHS) named it an Important Bird Area (IBA). The International Union for Conservation of Nature and Natural Resources (IUCN) also has identified this lake as a heritage site. The present study examined the state of environment in and around the Ousteri wetland, assessing the probable threats to the lake and its ecological environs. Ousteri Lake supports diverse rich and rare flora and fauna. Because of its extreme hydrological fluctuations over the annual cycle, the lake exhibits interesting patterns of flora and fauna. The north‐east monsoons leave the lake flooded during the winter months, while the scorching summers leave it totally dry. Ousteri Lake had been primarily used as a tank for irrigation purposes, with ~2,000 acres being cultivated. The main crop is paddy, and the only subsidiary is sugar cane. The natural vegetation, significantly altered by human activities, consists of over 220 species belonging to 63 families. The vegetation study conducted earlier have reported a total of 472 plant species, with the herbs being 40% of this total, followed by trees (21%). Other life forms in the lake are represented by less than 100 species. Ousteri Lake and its environs also provide a wide variety of habitat for many floral species, with 190 species being listed as least concern, 23 species as near threatened and 24 species as vulnerable, according to the IUCN Red List. About 14 floral species are being categorized as endemic. Further, about 202 fauna are listed as least concern, 13 species as near threatened, two species as vulnerable, three species as endangered and one as critically endangered. Moreover, five species are in an endemic category.