Backfill mining is an effective measure to control surface subsidence and restrain floor water inrush. It is an essential part of green mining technology. To solve the problem of confined water in mines under buildings, this study was carried out by combining theoretical analysis, laboratory simulation, and numerical simulation, taking the Liangbei coal mine as the research area. The coal seam floor failure characteristics of traditional longwall caving and paste filling mining methods were compared and analyzed. Based on the relevant mining theory, the key parameters, such as mining thickness and filling rate under the critical state of water inrush, were obtained. Then, the feasibility of backfill mining was expounded, and the surface subsidence of paste backfill mining was predicted and measured on site. The results demonstrated that the longwall caving mining method not only had the risk of water inrush, but also the possibility of step cracks at the surface, with the potential to result in serious damage to buildings. However, the backfill mining method reduced the floor damage depth of the coal seam from 12 m to 7 m, which reduced the water inrush coefficient by 12%, the maximum vertical concentrated stress by 42.1%, and the displacement subsidence value by 78.8%. These parameters correlated negatively with backfill strength. Meanwhile, the maximum subsidence, maximum inclined deformation, and horizontal displacement deformation were estimated as 730 mm, 2.5 mm/m, and 1.1 mm/m, respectively, consistent with the measured values (608 mm, 2.1 mm/m, and 0.9 mm/m, respectively). More relevantly, there were no obvious cracks found in the surface buildings, ensuring the safety of mining above confined water on the working face, and realizing the effective protection of surface buildings.