The lake is part of the Diamantina River floodplain, lying beside the Birdsville Track close to the state border with Queensland.

[2][3] Goyder Lagoon is located at the southern extent of the Diamantina River Wetland System, which is listed on the Directory of Important Wetlands in Australia because it is considered a “good example of a major, unregulated, arid zone river with a relatively pristine biota, an exceptional hydrological environment and extensive uncultivated floodplains.”[3] Goyder Lagoon is located within an area of 2,684 square kilometres (1,036 sq mi) which has been identified by BirdLife International as an Important Bird Area (IBA) principally because, when flooded, it supports large numbers of waterbirds, with a total of 170,000 estimated from aerial surveys in 2002.

The IBA supports over 1% of the world populations of freckled ducks, Australian terns and breeding royal spoonbills.

Other bird species for which the site is important include the letter-winged kite, inland dotterel, grey and Eyrean grasswrens, black and pied honeyeaters, gibberbird, banded whiteface, chirruping wedgebill and cinnamon quail-thrush.

In particular, the lagoon is reported as being the site of the largest waterbird aggregations which are found on its southern side including several species of cormorants, ducks, herons and ibises.