Crossing Bhutan is one of the shortest transits, and Bhutan holds the main breeding refuge/habitats for many Central Asian migratory birds. Our study assessed the community structure of waterbirds along the Punatsangchhu River basin, located towards the western part of Bhutan. The study determined the species composition, habitat use and preference of waterbirds, together with the different habitats present. Furthermore, the study examined the potential drivers of habitat fragmentation along the river. The entire study area was classified into five different habitats: dam, dredged area, farmland, urban, and pristine. The Cummings method of habitat assessment for high gradient river and streams was used to assess the habitat variables such as bank stability, vegetative protection and the riparian vegetation zone along the river and the association with the diversity of aquatic birds. A questionnaire survey was also used to evaluate the degree of threats caused by human disturbances. Among the five habitats, the dam area recorded the highest diversity (H` = 2.13) against their total count of 103 (8.7%) and the least diversity was recorded from farmland area (H` = 1.1) against their total count of 282 (23.8%) birds. Most waterbirds preferred an open area with shallow river depth. Habitats with emergent vegetation negatively correlated with the waterbird species composition. The study also recorded one Vulnerable species Aythya ferina, one Near Threatened species Vanellus duvaucelii, and one Endangered species Haliaeetus leucoryphus. Punatsangchhu is a major habitat to both resident and migratory waterbirds which stop here enroute from the Palaearctic and Indo-Malayan Region corroborating the need for habitat conservation and management regimes in the basin.