The coupling coordination between water sensitivity and industrial water environmental pollution stress in lake basins is important pathway for achieving sustainable watershed development. This study constructed an evaluation index system for both water sensitivity and industrial water environmental pollution stress in the watershed. The coupling coordination degree model, spatial Markov chain, and grey relational analysis were used to analyze the spatiotemporal evolution characteristics and driving factors of their coupling coordination in the Taihu Basin from 2007 to 2020. The results showed that: (1) From 2007 to 2020, water sensitivity in the Taihu Basin declined slightly, generally exhibiting a spatial pattern of “high in the southwest and low in the east”. In contrast, the degree of industrial water environmental pollution stress increased significantly, with an S-shaped high-stress belt forming in the east and low stress persisting in the west, indicating significant spatial differentiation. (2) The overall coupling coordination degree between water sensitivity and industrial water environmental pollution stress declined, exhibiting a “higher in the west and lower in the east” spatial distribution pattern, with characteristics of “club convergence” and a certain degree of spatial spillover effect. (3) The coupling coordination degree between water sensitivity and industrial water environmental pollution stress in the Taihu Basin was driven by five key factors, ranked in order of correlation as follows: technological investment level, industrial structure, population agglomeration degree, strength of environmental regulation, and socio-economic development level, with significant spatial variation in their effects. Therefore, this study suggests optimizing the spatial layout of productivity within the basin, implementing differentiated water environmental regulation policies, and improving the comprehensive watershed management, compensation, and monitoring and early warning system, thereby promoting the sustainable development of lake basins.