Groundwater is a vital resource under threat in island communities. Karainagar, a 22 km2 island, is one of seven islands off the coast of Jaffna in Northern Sri Lanka, with its population of just about 11,000 persons, experiences seasonal water shortage, and salinity in groundwater as twin threats impacting on their lives. This paper reports on a 3‐year study (October 2019 to September 2022) to map groundwater dynamics of Karainagar island spatially and seasonally and discusses the patterns revealed in terms of community needs, policy implications, and governance ideas that could already be considered by relevant authorities and citizens jointly. Thirty‐six dug wells used for drinking, domestic, agricultural, and public purposes were selected, and water level, salinity, and pH changes recorded along with daily rainfall. This paper offers a thorough description of the geography, land use, distribution of wells, and water bodies, followed by discussion of the current status of the groundwater in Karainagar island. Year‐to‐year differences in rainfall pattern resulted in different rates of change and range in water level with a corresponding reverse pattern seen in salinity with some exceptions across the island. Cumulative rainfall required to reach full capacity of wells ranged from 652 to 892 mm over the 3 years with an average figure of 739 mm of rain. This implies that any further rainfall during early phase of the main rainy season is potential surface water for storage and runoff. Practices such as unregulated pumping and construction of tube wells are argued to be contributing to increase in salinity levels with health implications for residents. A participatory governance approach that overcomes limitations of the existing institutional approach is proposed. Its success based on broad stakeholder engagement, improved equity, and transparency when supported by adequate policies and village level aquifer monitoring will enable sustainability of groundwater resources in Karainagar.