China has experienced an unparalleled urbanization process in recent decades, which has dramatically changed the water environment. Quantification of the water environment carrying capacity (WECC) is crucial given its importance to sustainable development. Existing studies have typically focused on the overall WECC system and lacked analysis of its internal features. In this study, the concepts, calculations, and classifications of the WECC were further developed. Using Nanjing, China, as a case study, we developed a hierarchical evaluation indicator system including three system layers (social, environmental and economic subsystems). We applied the entropy weight and fuzzy comprehensive evaluation method to evaluate the temporal variation tendency of WECC, and explored the deep-seated problems stemming from urbanization. The results indicated that WECC in Nanjing was 0.3045–0.5302 during 2006–2017, thus approaching a moderate grade with a relatively slow growth rate. Social, environmental, and economic subsystems increased by 29.3%, 83.1%, and 97.2%, respectively. Overall, Nanjing had a solid foundation regarding its economic subsystem, but its social and environmental subsystems were under pressure. Factors such as slow population growth as well as reduced energy and water use intensity improved WECC, whereas factors such as increased population density and excessive water consumption blocked WECC. Practical suggestions were proposed to resolve the primary problems of the WECC under urbanization. This holistic approach is urgently needed to achieve water environmental sustainability, both for Nanjing and for other emerging cities.