As part of the construction of One Beautiful China, it is imperative to establish a demonstration belt for green development in the Yangtze River Basin. Identifying obstacles to urban green development and assessing the process can assist in promoting a green and high-quality development of the Yangtze River Basin. Currently available green development evaluation studies are unable to reflect the unique characteristics of the cities in the watershed, which are linked by water, and the requirements of "Three Waters" coordination (i.e. Water resources, Water environment, and Water ecology) in the new era of urbanization. Furthermore, identification of obstacles to green development and the improvement paths has not been sufficiently targeted. In existing studies, the entropy weighting method does not take into account the correlation between multidimensional indicators of green development. By addressing the shortcomings of existing research, this article developed a water-linked urban green development indicator system that can reflect the "Three Waters" coordination for the Yangtze River Basin, and adopted comprehensive evaluation methods including CRITIC-entropy, TOPSIS, obstacle degree model, and systematic clustering to assess the green development process and the impact of obstacles in 63 key cities in the basin from 2012 to 2021. In addition, the article proposed the differentiated approaches to promoting green development. The results show that: (1) The green development process of cities in the Yangtze River Basin has been significantly accelerated since the implementation of co-protection policy in 2016. (2) Although the obstacles to green development of cities have been significantly reduced due to economic scale, productivity, and environmental efficiency, heavy chemicalization of the industrial structure and agricultural non-point source pollution have become more prominent. Additionally, most cities faced barriers to green development due to high levels of water exploitation and inefficient economic and social water use. (3) Based on research conducted in cities with different types of obstacles, the following results were found: In cities with ecological obstacles, it was important to strengthen the management of water ecosystem safety, reduce the intensity of resource development, and implement an effective control system. Economic obstacle-type cities were encouraged to develop zero-pollution industries and establish a sound mechanism for monetizing eco-products. In order to improve resource and environmental efficiency, efficiency obstacle-type cities should strengthen the rigid restrictions on water resources and develop industrial and agricultural eco-cycling. Cities with ecological-economic obstacles should take the lead in promoting the green transformation and optimization of water-related industries to enhance their competitive advantages in the market, as well as strengthening the environmental risk management within water-related industries. In regards to cities with hybrid obstacles, it is important for them to place a strong emphasis on innovation-driven promotion of industrial transformation and upgrading, as well as resource and environmental efficiency enhancement, while coordinating the relationships between the "Three Waters".