The area is a geological border between the Foothills of the Great Smoky Mountains (which rise to the south) and the Appalachian Ridge-and-Valley range.

During 1941, President Franklin D. Roosevelt requested Congress to allocate funding for a dam on the French Broad River in East Tennessee.

After the Japanese attack on Pearl Harbor resulted in the United States entering World War II, construction of this dam became a high priority in order to generate hydroelectric power for national defense purposes.

Senator Kenneth McKellar (D-Tennessee) opposed the project because it would flood some 40 square miles (100 km2) of fertile farmland important to the local food canning industry.

[4] The Douglas Project required the construction of ten smaller, earthen saddle dams to fill in gaps along the adjacent ridgeline and permit a higher water elevation than would otherwise be possible.

[1] In spite of a four-week work delay caused by flooding, the Douglas Dam was completed and its floodgates were closed on February 19, 1943, 382 days after the construction began; this set a world record for a project of its size.

[1] After its completion, the Douglas Dam powerhouse furnished electric power for two critical war industries, aluminum production and the Manhattan Project's uranium enrichment operations at nearby Oak Ridge, Tennessee.

[6] The water stored in Douglas Lake serves an important purpose during extended dry periods and droughts in East Tennessee and western North Carolina.

This also helps to mitigate potential flood and overtopping conditions that could result from spring rains and meltwater from surrounding mountain streams.

Significant amounts of freshwater fish are caught in Douglas Lake as part of the food supply for human beings.

Primary uses of the lake and its shores are fishing, boating, water skiing, swimming, camping, hiking, and wildlife observing.