To identify the genetic determinants of domestication and productivity of Asian water buffaloes (Bubalus bubalis), 470 genomes of domesticated river and swamp buffaloes along with their putative ancestors, the wild water buffaloes (Bubalus arnee) are sequenced and integrated. The swamp buffaloes inherit the morphology of the wild buffaloes. In contrast, most river buffaloes are unique in their morphology, but their genomes cluster with the wild buffaloes. The levels of genomic diversity in Italian river and Indonesian swamp buffaloes decrease at opposite extremes of their distribution range. Purifying selection prevented the accumulation of harmful loss-of-function variants in the Indonesian buffaloes. Genes that evolved rapidly (e.g., GKAP1) following differential selections in the river and swamp buffaloes are involved in their reproduction. Genes related to milk production (e.g., CSN2) and coat color (e.g., MC1R) underwent strong selections in the dairy river buffaloes via soft and hard selective sweeps, respectively. The selective sweeps and single-cell RNA-seq data revealed the luminal cells as the key cell type in response to artificial selection for milk production of the dairy buffaloes. These findings show how artificial selection has been driving the evolutionary divergence and genetic differentiation in morphology and productivity of Asian water buffaloes.