Atoll lagoons grow by constant sediment supply and are increasingly being affected by climate change. The impacts are non-uniform; thus, understanding the mechanisms governing the sediment dynamics is crucial to assessing atoll island stability. Satellite geomorphological and sedimentological studies have been conducted on Agatti and Kavaratti atolls in the Lakshadweep Archipelago (Northern Indian Ocean) to discern factors governing sediment dynamics. These lagoons, with maximum depths of 4 m, are grainstone-dominated (79 % - Agatti & 96 % - Kavaratti). Sand-sized fractions (2–0.125 mm) constitute approx. 87 % and 90 % of the Agatti and Kavaratti lagoon, respectively. The major sediment producers include corals (34–57 % - Agatti; 37–58 % Kavaratti) and molluscs (31–34 % - Agatti; 32–39 % - Kavaratti) followed by forams (8–20 % - Agatti; 2–13 % - Kavaratti), algae (2–7 % - Agatti; 2–10 % - Kavaratti) and Halimeda (1–6 % - Agatti; 1–10 % - Kavaratti); within each sample fraction. Coral clasts and molluscs are prevalent near the north, and algae (including Halimeda) is abundant in the south in Agatti. In Kavaratti, molluscs and algae, and Halimeda are prevalent in the north (near the dredging channel) compared to coral clasts. For both atolls, forams are confined to the south and in the lagoon's interior. Generally, for both atolls, coral clasts and algae (including Halimeda) decrease from the reef flat to the island, while molluscs show opposite trends. Reef flats, patch reefs and seagrass patches serve as significant production zones. Anthropogenic factors (dredging) have altered ocean parameters, evidenced by an increase in algae and molluscs and a decrease in coral clasts. The wave-induced currents dictate sediment redistribution, with lighter components such as molluscs and coral clasts transported across the lagoon, while sheltered zones retain particular components such as forams. The small size of the atolls, shallow bathymetry and sand-sized sediments imply potential bucket fill. As climate change progresses, intensified wave-induced currents (linked to stronger monsoons) will result in the retention of coarse-grained sand, with these components dictating future sediment supply. Coupled with rising coral mortality, molluscs would become dominant, affecting sediment production; leading to land loss. The study underscores the importance of local factors such as geomorphic zones and hydrodynamics in discerning island stability in terms of climate change.