Before European settlement the lake was used by Aboriginal people as an important site for tortoise hunting, with campsites occupied for long periods.

[2] The first non-Aboriginal settlement occurred in 1885, when William and Alfred Skeet were granted a 'Special Occupation' license for 100 acres (0.40 km2) adjoining the lake, as well as licences to cut and sell timber.

It has extensive fringing sedgeland typical of the Swan Coastal Plain, and is a major breeding site, migration stop-over and semi-permanent drought refuge area for waterbirds.

[1][2] The lake lies on the eastern edge of the gently undulating Bassendean Dune System, which is formed mainly of leached grey-white siliceous sands.

The lake bed sediments are up to two metres thick and include clay, silt, peat, diatomite, marl and freshwater limestone.

Surrounding the open water is an almost continuous belt of the introduced bulrush Typha orientalis, behind which various sedges, rushes and reeds grow.

The higher sandy ground on the eastern side supports open woodland dominated by candlestick banksia.

It regularly supports more than 1% of the national population of five shorebirds: red-capped plover (with up to 1,300 recorded at any one time), black-winged stilt (3,840), red-necked avocet (1,113), long-toed stint (up to 80), and curlew sandpiper (2,000).

[1] As well as the uncommon skink Lerista lineata, Forrestdale Lake supports six frog species and at least 62 aquatic invertebrate taxa.

[3] The use of pesticides to control chironomids (non-biting midges) is a potential threat to aquatic invertebrate and bird life; in 1984 about 220 shorebirds were killed at the lake as a result of such spraying.