The Ghodaghodi Lake Complex is a Ramsar site, Nepal’s first bird sanctuary, and has significant ecological and economic values. The lake complex is in the western part of the lowland of the Terai region. Numerous studies indicate a relation between the normalized difference vegetation index (NDVI), land use, and land cover with plant diversity. However, the association between terrestrial plant diversity and NDVI in the Ghodaghodi Lake Complex is unknown but has important implications due to potential land use changes. We aimed to understand the relationship between plant diversity and NDVI in the Ghodaghodi Lake Complex. We performed a vegetation survey using a simple random sampling methodology. Shannon–Wiener’s diversity index (H’) was calculated from the field data, and Landsat images were used to compare land use and land cover changes and calculate NDVI values for 2000 and 2022. The image classification shows that forest cover in April and December 2000 was 71.1% and 58.5%, respectively, and was the dominant land cover in the study area. In contrast, agriculture occupied 18.8% and 27.3% in April and December 2000, respectively, and was the primary land use. Forests covered the most land in April (64.8%) and December (65.3%) of 2022. Likewise, agriculture was a widespread land use. We found a significant correlation (r = 0.80, p < 0.05) between the NDVI and plant species diversity, as the NDVI explained 65% of plant species diversity. There was a decrease in forest cover from 2000 to 2022. The strong correlation between the NDVI and vegetation species diversity shows that the NDVI can be a substitute for plant diversity. Our findings show that increased NDVI corresponds to increased plant species diversity and that the lake complex had more plant diversity in 2022 than in 2000, despite a decrease in forested lands.