Shrimp (Penaeus monodon) farming is a traditional aquaculture in southwest coastal Bangladesh. Changes in both the farming practice and yield of shrimp since the advent of commercial production in this area are evident in scientific studies. We assessed the historical perspective of shrimp farming indicating the major phase changes and present situation of the shrimp farming practice including recent changes in yield and cost-benefit. A systematic random sampling method was employed to conduct a total of 240 questionnaire surveys, 24 focused group discussions, and 60 key informant interviews in six sub-districts (upazila) from southwest coastal Bangladesh. We identified four major phase changes in the history of shrimp farming in southwest coastal Bangladesh and found that shrimp mixed culture is the most preferable form of extensive cultivation at present. Shrimp farmers’ perceptions about changes in shrimp yield and changes in availability of ecosystem services represent declining trends over the last two decades. For 2015, shrimp yield was not significantly different with respect to salinity levels. The net benefit from shrimp mixed culture in 2015 was 121,000 taka/ha, which is 2.35 times higher compared to the net benefit from only shrimp (51,500 taka/ha). In this context, promoting shrimp mixed cultivation could be a management solution for sustainable development of shrimp farming in southwest coastal Bangladesh. The National Shrimp Policy of the government also emphasized on promoting environment-friendly shrimp mixed cultivation for sustainable development of shrimp farming. However, more institutional support such as training, extension support, technical assistance, and credit facility is required to implement the policy.