It is one of nine dams on the river owned and operated by the Tennessee Valley Authority, which built the dam in the late 1930s as part of a New Deal era initiative to create a continuous navigation channel on the entire length of the river and bring flood control and economic development to the region.

The reservoir's backwaters have formed embayments on the lower parts of Browns Creek and Spring Creek to the west and east of the city of Guntersville, respectively, effectively placing the city at the tip of a long peninsula.

[2][4] In the early 1900s, the U.S. Army Corps of Engineers investigated several possible dam sites in the Guntersville vicinity in hopes of flooding a significant stretch of the river upstream from the city, which had unreliable water levels and had long been an impediment to major navigation in the upper Tennessee Valley.

In 1935, TVA followed up the Army Corps investigations, deeming a dam at Guntersville necessary to extend the navigation channel beyond Wheeler Lake, which at that time was under construction.

[2] The hydroelectric project's components were listed on the National Register of Historic Places in 2016.