The southern coast of Laizhou Bay is one of the most severely affected areas in China by salt water intrusion. This study established a groundwater monitoring profile along the southern coast of Laizhou Bay, approximately 35 km in length. Groundwater and sediment samples were collected, and physical and chemical parameters, isotope tracing, and microbial analyses were conducted. The results indicate that the primary cause of salt water intrusion on the southern coast of Laizhou Bay is the historical over-extraction of groundwater. The salt water intrusion results from the combined effects of freshwater and brine groundwater funnels, which alter the groundwater flow field, leading to the movement of saline water toward the southern freshwater zone. Groundwater salinity increases from inland to the coastal zone on the southern shore of Laizhou Bay. The salinity of the brine originates not only from ancient seawater but also from the dissolution of rock salts. The saline water is the result of the mixing of groundwater with saltwater and brine. The microbial diversity in groundwater shows a trend of decreasing first and then increasing with salinity, while the microbial diversity in sediments generally increases with increasing salinity. Microorganisms such as genus Marinobacter and family Alteromonadaceae can serve as biomarkers for seawater or ancient seawater sources. The groundwater salinization process affects biogeochemical processes such as carbon, nitrogen, and sulfur cycling. Sulfate reduction is enhanced in groundwater with high salinity.