Many of the world's lagoons and estuaries, representing the most important habitat for shorebirds, are increasingly degraded, often associated with dramatic declines in shorebirds, particularly in Asia. We investigated effects of hydrology on shorebird communities of two coastal lagoons of a Ramsar site in south-east Sri Lanka. One of the lagoons (Bundala) experienced natural water level fluctuations, while the other (Embilikala) had high stable water levels (>10 cm), maintained by inflows from irrigated agriculture. These inflows dramatically affected composition and abundance of shorebird communities and their prey. Tactile and visual foraging shorebirds were consistently more abundant on Bundala than Embilikala lagoon. Their feeding efficiency was significantly (50%) higher on Bundala, where large (500 gm) benthic prey were more abundant than on Embilikala. Contrastingly, small (60 gm) planktonic prey dominated the hydrologically stable Embilikala lagoon where pelagic foraging shorebird species dominated the shorebird community. On both lagoons, visual and tactile species foraged predominantly in shallow water (1-10 cm). Pelagic shorebirds also foraged in water depths >10 cm but 20% less efficiently than in shallower water. Effective shorebird conservation depends on reducing anthropogenic impacts that detrimentally affect functional processes and habitat value. The detrimental effect of altered hydrology on Embilikala lagoon could be reversed by diverting drainage water. Re-establishing a natural hydroperiod, would increase the productivity of the lagoon for foraging shorebirds. Restoration of shorebird habitat on this Ramsar site could also improve other ecosystem services such as fisheries and tourism. Changes to the hydrology of coastal lagoons elsewhere may be similarly affected.