The main objective of this study was to evaluate the relationship between the declining groundwater level and land subsidence and sinkhole collapse in the Hamedan central plain, western Iran. In the last three decades, the increase in the use of groundwater for agricultural and industrial expansion accompanied by successive droughts has greatly lowered the groundwater level in the area. This has resulted in land subsidence and increased sinkhole occurrence. In this paper, both hydrogeological and geotechnical investigations were performed to identify a mechanism to explain the changes in the occurrence of these geological hazards. This study identifies three main triggering factors for the development of land subsidence and sinkhole formation. These factors include the presence of fine-grained materials (for land subsidence) and karstic limestone bedrock (for sinkhole formation), increase of effective stress, and generation of turbulent groundwater flow at the soil–bedrock interface. Risk of the occurrence of sinkholes affects planning decisions for most types of development in the study area. As a result of this study a sinkhole susceptibility map was generated indicating the location of hazardous regions.