With the recent acceleration in urbanisation and industrialisation, industrial pollution has severely impacted inland water bodies and ecosystem services globally, causing significant restrains to freshwater availability and myriad damages to benthic species. The Kelani River Basin in Sri Lanka, covering only ~3.6% of the land but hosting over a quarter of its population and many industrial zones, is identified as the most polluted watershed in the country. This study used unsupervised learning (UL) and an indexing approach to identify potential industrial pollutant sources along the Kelani River. The UL results were compared with those obtained from a novel Industrial Pollution Index (IPI). Three latent variables related to industrial pollution were identified via Factor Analysis of monthly water quality data from 17 monitoring stations from 2016 to 2020. The developed IPI was validated using a Long Short-Term Memory Artificial Neural Network model (NSE = 0.98, RMSE = 0.81), identifying Cd, Zn, and Fe as the primary parameters influencing river pollution status. The UL method identified five stations with elevated concentrations for the developed latent variables, and the IPI confirmed four of them. Based on the findings from both methods, the industrial zones along the Kelani River have emerged as a likely source of pollution in the river’s water. The results suggest that the proposed method effectively identifies industrial pollution sources, offering a scalable methodology for other river basins to ensure sustainable water resource management.