A large number of remote sensing based studies have shown evidence of a prominent river system, which has become buried under sand cover of Thar Desert sometime during late Holocene. This major river has been identified as Sarasvati, a legendary river mentioned in ancient Indian texts. This region is rich with archaeological sites of Harappan civilization (2500–500 BC). The present study has utilised digital image processing and enhancements techniques on multisensor satellite data followed by field investigations to reconfirm known traces and detect hitherto unknown traces of palaeochannels of Sarasvati river through parts of Indus alluvial plain in Thar desert. Potentials of IRS-P4 OCM (Primarily an Ocean Color Sensor, with eight narrow spectral channels, high radiometric resolution of 12 bits and large swath of 1420 m) could be exploited for the first time to detect hitherto unknown traces of palaeochannels of Sarasvati river through sand dune topography of Thar desert in parts of Western Rajasthan in India and adjoining parts of Pakistan by applying Principal Component Analysis technique. Pattern of palaochannels indicate westward migration of the Sarasvati river in parts of Indus alluvial plain. Database of more than 1000 archaeological sites compiled from various published sources, prepared in GIS environment could be utilised to understand their relationship with identified courses of the Sarasvati palaeochannels. Through this study it was found that there is a large spread of Mature Harappan (2200–1700 BC) sites along the palaeochannel of the Sarasvati and its tributaries in north-west India, but late Harappan (1700–1500 BC) sites are limited to further west in adjoining regions of Pakistan indicating that the shift of cluster of settlements have followed the pattern of river migration towards west. Digital terrain modelling by superimposing archaeological sites on SRTM DEM along with draped satellite data (Resourcesat-1 AWiFS and IRS-1D LISS-III) has helped in identifying geomorphological guides for archaeological investigations such as presence of relict natural levees seen as raised mounds and coincidence of known archaeological sites over them. It is suggested that other relict natural levees or raised mounds adjoining the identified palaochannel courses may be taken up for further archaeological exploration.