The proposed Indian River-linking Project is based on the Indian National Perspective Plan for the diversion of huge amount of waters from the major internationally shared rivers, which includes among others the Ganges and the Brahmaputra rivers. There are two components of the project. Its first component aims to link 14 Himalayan rivers in Northern India and the second component would connect 16 peninsular rivers in Southern India. The first component involves the establishment of connection with the Ganges and the Brahmaputra, which is of special interest to Bangladesh. India seeks to complete this ambitious project by 2016. The Supreme Court of India, in response to a writ petition has directed the government of India to complete the construction of the river linking project by 2012. This proposed scheme for interlinking rivers in India has become a grave cause of concern in Bangladesh and created new tensions with India. Bangladesh expressed its concerns over the potential impact of India’s project on interlinking of trans-boundary rivers on the economy and environment of Bangladesh. Water diversions by India are likely to have a serious impact on Bangladesh's access to and use of fresh water as a lower riparian country. The outcome of the project has the potential to be an unprecedented man made disaster for natural ecosystems and human health in Bangladesh. Many including the civil societies in both India and Bangladesh are now apprehensive of its viability and detrimental effects. The controversy surrounding the project is steadily outgrowing the national arena of Bangladesh and India and making the project an international concern. This paper examines the impact of this project on downstream ecology and economy of Bangladesh. It analyses the relevant international law, international environmental law and policies in determining the rights and obligations of the riparian states in sharing and utilising their common water of international rivers. It outlines the responsibility and liability of riparian states, such as India, for their action in diverting the waters of international rivers causing serious detriment to the use and rightful share of co-riparian states, such as Bangladesh.