Mercury (Hg) pollution is a major issue in many tropical estuarine systems. This study presents the distribution and speciation of mercury in Vembanad Lake (the largest estuarine system on the west coast of India), a RAMSAR site. It unravels how natural ligands control Hg speciation in the estuarine sediment system. Sedimentary Hg concentrations in the estuarine system varied from 3.5 ± 0.3 µg/kg to 50,105.0 ± 2505 µg/kg. The northern part of the lake exhibited exceptionally high sedimentary Hg concentrations (39.8 ± 2.4 µg/kg to 50,105 ± 2505 µg/kg), likely due to nearby industrial discharge. The central (3.5 ± 0.3 µg/kg to 116.0 ± 7.8 µg/kg) and southern regions (18.4 ± 1.1 µg/kg to 75.1 ± 1.0 µg/kg) had comparatively lower sedimentary Hg levels. Chemical speciation (Thermo-desorption technique) analysis revealed that sedimentary organic matter (SOM) acted as the primary host for Hg (21.6–100 % of total Hg), followed by sedimentary sulphides (SS) (below detection limit- 47.5 % of total Hg). The δ13C values for sediment samples ranged from −23.3 ‰ to −29.9 ‰. The end member mixing model indicates that SOM in the lake were derived from diverse sources, including terrestrial plants, soil OM, marine-derived organic matter, and anthropogenic activities like the coconut husk retting process. This study demonstrated how variations in natural ligand concentrations influenced the distribution and speciation of Hg in the system, and proposed a detailed mechanism for these processes. This study also suggests that activities related to disturbing sediment must be conducted cautiously to minimize Hg mobility and protect the ecosystem and human health in the region. The outcome of the research is expected to assist decision-makers in controlling Hg pollution in the estuary.