Lake Matheson formed between two moraine terraces left by the rapid retreat of Fox Glacier / Te Moeka o Tuawe 14,000 years ago, at the end of the last glacial period.

The retreating glacier left behind a valley and a huge slab of ice insulated by a deep layer of moraine gravel, which gradually melted and collapsed to form the lake bed.

[2] Lake Matheson is 30 ha in area, with an approximately 1.5 km shoreline and an average depth of 12 m. The streams that feed it pass through dense native bush, and often accumulate foam after heavy rains.

[1] The reflections are most visible at dawn or dusk, and the best views are in the early morning of a calm clear day, before wind disturbs the water surface or clouds form on the peaks.

[5] From the 1950s an early-morning excursion to the lake was offered by the nearby Fox Glacier Hotel; visitors would be taken by bus to the present trailhead, and embark on a 15-minute walk through the bush, without the benefit of today's bridges and tracks.

Around the edge of the lake the forest is mainly composed of Hall's tōtara (Podocarpus laetus), southern rātā (Metrosideros umbellata), kāmahi (Weinmannia racemosa), and rimu (Dacrydium cupressinum).

Other forest trees include miro (Prumnopitys ferruginea), broadleaf (Griselinia littoralis), kahikatea (Dacrycarpus dacrydioides), mountain horopito (Pseudowintera colorata), and pate (Schefflera digitata).

[15][16] A local ecotourism operation began Project Early Bird in conjunction with the Department of Conservation in 2018 by setting 80 traps around Lake Matheson to catch introduced predatory mammals like stoats and rats.