Rapidly growing lakes in deglaciating mountain regions represent both: emerging risks and options for human livelihoods. In the Andes of Peru, seasonal water scarcity and Glacial Lake Outburst Floods (GLOF) pose a serious threat for highly exposed and vulnerable people. In addition, water demand is growing due to increasing irrigated agriculture, population and hydropower production. In this context, we assess current and future water risks and management options for the Vilcanota-Urubamba basin, Southern Peru. Therefore, the GLOF susceptibility of glacier lakes and the potential maximum reach of damaging flow were analysed. Eighteen out of 134 current and another six out of 20 future glacier lakes were identified as potentially highly susceptible to GLOF. A total of eight existing and one possible future lakes indicate very high risk potentials. Furthermore, a comprehensive surface water balance scheme for five selected subcatchments reveals that future river discharge could be reduced by some 2–11% (7–14%) until 2050 (2100). Particularly in headwaters and during dry seasons, glacier contribution representing roughly 15–25% to total streamflow is crucial and would substantially decrease to below 4–22% (1–3%) until 2050 (2100) with strong glacier shrinkage under intense warming (scenario RCP8.5). In the middle and lower basin, long-term water availability could be jeopardized by growing irrigated agriculture and hydropower capacity. Combining a GLOF and water shortage risk assessment, three key hotspots of current and future water risks were identified. In the context of the identified risks and complex intertwining of water users involving conflict potentials, robust adaptation planning is necessary within an integrative water and risk management framework. Therefore, it is crucial to incorporate ancestral and local knowledge for long-term management planning and implementation. This process should take place beyond temporarily limited governmental and project agency and strengthen broad acceptance of corresponding measures for adapting to hydroclimatic and socioeconomic changes.