The canyon in which Lake Billy Chinook lies was carved by the three rivers that flow into the lake. The Deschutes Formation into which it is carved began forming about 11 million years ago, as alternating layers of basaltic lava, stream sediment, and volcanic debris flowed into the area from the Cascade Range. One to three million years ago, lava flows from the Cascades and Newberry Volcano capped the exposed material, forming the rimrock basalt which is visible atop the canyon. Further erosion by the three rivers, volcanic activity, and wind have continued to form and erode the canyon.