Hydropower can play an important role in decarbonizing energy systems, but opportunities for future low-impact hydropower are limited by existing dams, which are driving declines in freshwater fish worldwide. How to mitigate past development impacts while enabling low-impact future hydropower expansion remains unclear. Here, we propose a strategic restoration-development paradigm to break unfavorable lock-ins from past hydropower development. For the Lower Mekong River, we demonstrate how strategic multi-objective optimization and habitat fragmentation modeling for 710 fish species can be used to design restoration-development policies. Our results show that a combination of removing high-impact dams, fishways retrofitting, and strategic planning can break locked-in environmental impacts and restore connectivity to a level achievable had strategic planning been adopted before the onset of hydropower deployment. This highlights the essential role of restoration in combination with strategic planning for future sustainable hydropower worldwide.