The earlier theories of the crater's origin being a meteorite impact, volcanic cinder, or limestone sinkhole are now discredited.

Spanish colonizers and Conquistadors knew about the existence of a sacred lake in the Eastern Ranges of the Andes possibly as early as 1531.

However, the first conquistador to arrive at the actual location was Gonzalo Jiménez de Quesada, possibly in June 1537, while on an expedition to the highlands of the Eastern Ranges of the Andes in search of gold.

This brought the Spanish into first contact with the Muisca inhabiting the Altiplano Cundiboyacense, including around Lake Guatavita.

The legend says the lake is where the Muisca celebrated a ritual in which the zipa (named "El Dorado" by the conquistadors) was covered in gold dust, and then, venturing out into the water on a ceremonial raft made of rushes, dove into the waters, washing off the gold.