The irregularly-shaped lake lies at the northern end of Cinder Cone and the Fantastic Lava Beds, which is a complex of lava flows and a cinder cone. Some time in the mid-1770s the lava flow from the Cinder Cone flowed into and around the lake. This formed an underwater lava field. Water from Snag Lake to the south flows through the porous lava field to Butte Lake. Water from Butte Lake drains via Butte Creek, which flows north out of the parkland.