The establishment of industrial activities in proximity to sensitive urban land uses, in the absence of spatial coordination, can lead to the intensification of functional incompatibilities and environmental pressures. In the city of Kadhimiya, the coexistence of industrial, residential, religious–historical functions and proximity to the Tigris River has increased the necessity of examining the spatial compatibility of industries; accordingly, the aim of this study is to analyze the location pattern of industrial activities and identify their conflict hotspots with sensitive urban land uses, with emphasis on the requirements of sustainable development. The study is applied in purpose and descriptive–analytical in nature. The distribution and clustering of industries were examined alongside residential, educational, healthcare, religious, and historical land uses, green and open spaces, and environmentally sensitive areas, and overlay and distance analysis made it possible to classify conflict zones into five categories, from very low to very high. The results indicate that the distribution of industries in Kadhimiya is not uniform and that the largest industrial concentration is located in the southwest. In some parts of the west and southwest, as well as in scattered central locations, spatial contact between industries and residential and service land uses is observed, and some industries are situated in the category of less than 250 meters from residential areas. The main land-use conflict hotspot was identified in the southwest, with smaller hotspots in the west, northwest, north, and southeast of the city, and potential environmental pressures are also concentrated mainly around industrial agglomerations and certain areas adjacent to the Tigris River. The spatial analysis of the industrial distribution maps shows that organizing existing zones, controlling the establishment of incompatible industries adjacent to sensitive land uses, observing religious–historical buffer zones, and protecting natural areas are among the priorities of spatial planning in the city of Kadhimiya.