Lake Chelan formed behind a moraine drift dam from a glacier with a sloping elevation 1,000 to 4,500 feet above the current lake surface. The waters of the lake's Stehekin River tributary arise in existing glaciers at altitudes up to 8,000 feet. The Stehekin's steep 35-mile run collects a sediment load that has built a delta where the river enters the lake. Offshore from the delta, the upper lake quickly deepens to 500 feet. In the lower 15 miles just above the lake's outlet, depth is less than 200 feet.
The Stehekin River feeds 70 percent of the lake waters. Railroad Creek tributary feeds 10 percent. There are 50 smaller tributaries, including ephemeral and intermittent streams. Roses Lake, Wapato Lake and Dry Lake (the Manson Lakes) drain into Stink Creek and then into Lake Chelan. A glacial sill (moraine debris bar) divides Chelan into two basins: the deep Lucerne basin with 92 percent of lake water and the shallow, downstream Wapato basin.
In 1903, the Chelan Water Power Company completed the first hydroelectric generating station at the lower end of Lake Chelan. Through a series of acquisitions, management passed to Washington Water Power, which completed a larger dam in 1927. The current dam dried the Chelan River channel downstream from the lake, except when the dam's spillway gates were opened. Water from the hydroelectric station is discharged into the dam's tailrace (artificial channel) and continues to the Columbia River. New licensing in 2006 requires permanent discharge into the Chelan River beginning in 2009 for fish spawning
The Lake Chelan watershed is 924 square miles of mostly national forest and national park land. Agricultural land is only three percent of the watershed, including 11,600 acres of irrigated orchards. Urban and residential land is less than one percent. The Lake Chelan Reclamation District is an agricultural irrigation district that also provides treated drinking water and sanitary sewers for the town of Manson on the lakeshore, with aid from the U.S. Bureau of Reclamation.
In 1998, studies of game fish tissue taken from Lake Chelan discovered unacceptable levels of DDT, a synthetic organic molecule used as a pesticide beginning in the 1940s. DDT accumulates in the food chain and was banned in the United States in the 1970s. Mackinaw trout tissue from Lake Chelan's Wapato basin were 97 percent above Clean Water Act of 1977 quality goals and four times higher than other Washington sites. Chelan's Lucerne basin met clean water criteria.
