The rapid urbanization of Lagos City has resulted in an expansion of urban and nighttime lights, which, in turn, places a significant burden on natural resources. This burden exacerbates the adverse impacts of changes in climate parameters, underscoring the need for measures to mitigate its effects. Therefore, this study examines the relationship between economic development, population growth, urban expansion, and climate change in Lagos City over two decades. GIS and remote sensing methods were used to process nighttime light, Landsat images, changes in climate parameters, and NDVI data to measure Lagos’ sustainability level. The results show that: (1) between 2000 and 2020, nighttime light coverage grew from 175.53 km2 to 631.16 km2. Lagos’ GDP grew by 88.9%, while the population increased from 13.4 million in 2000 to 26 million in 2019. (2) The built-up areas significantly increased from 13.0% in 2000 to 33.6% in 2020, while vegetation land declined, decreasing from 63.7% in 2000 to 46.4% in 2020. (3) Furthermore, Lagos City has experienced changes in climate parameters, with a decrease in annual rainfall from 2954.81 mm in 2000 to 1348.81 mm in 2020 and an increase in the average maximum temperature from 31.56 °C in 2000 to 31.79 °C in 2020. However, the rapid growth of cities has brought about significant environmental impacts. A strong relationship exists between horizontal urban development and nighttime light, indicating that urban areas encroach on natural landscapes as Lagos grows. Then, there is a relationship between urban development and vegetation and between temperature and vegetation. A compact city planning approach, which prioritizes vertical development and efficient land use to mitigate urban sprawl and preserve green spaces, is recommended.