Kolleru, the largest fresh waterbody in India (Andhra Pradesh), has undergone significant changes due to development of aquaculture in that area. This resulted in the water spread area of the lake's degradation and increase in settlement and these changes directly affected the environment of the lake. The lake slowly started vanishing by losing its potential and ecological importance. Due to this an order was put up by the Honorable Supreme Court of India for the demolition of aquaculture ponds in 2006, which when carried out resulted in the revival of the lake with its original environment. Application of Remote Sensing and GIS techniques help us to assess the environmental Impact on the lake before and after the demolition of the aquaculture ponds. The present study was carried out to assess the environmental impact assessment on the lake. The Satellite Imagery for the year 1977 reveals that there is no aquaculture during that period. IRS 1D LISS III for the year 2000 reveals the development of the aqua farms and IRS P6 LISS III 2007 data clearly shows the revival of lake features. From the year 1977 the area under lake water spread with vegetation and mud were converted as aquaculture farms. After the demolition of the aquaculture farms the following categories were increased (from the year 2000 to 2007) i.e., lake water spread area with vegetation at 34.62 km2, lake-mud as 31.44 km2, agriculture at 5.81 km2and settlement as 0.52 km2. Aquaculture farms have decreased to 71.93 km2.