[1] In 1968 the United States Army Corps of Engineers built Blue Lake Dam and Saddle Dam about 2 miles (3.2 km) from the mouth of the Blue River on the McKenzie River to create a reservoir for flood control and irrigation.

[1][6] Despite frequent blooms of blue-green algae,[7][8] the lake is heavily used for recreation.

[4] Trout are the principal fish, supplemented from local hatcheries.

[2] Blue River Reservoir is used for fishing, boating, swimming, and waterskiing.

[4] The Forest Service also manages two launching sites for motorized and non-motorized boats, one near Lookout Campground and the other near Saddle Dam on the south shore.