It is surrounded by three golf courses (the private Olympic Club and San Francisco Golf Club, and the public TPC Harding Park), as well as residential areas, Lowell High School, San Francisco State University, Lakeshore Alternative Elementary School, Stonestown Galleria, Fort Funston and the Pacific Ocean.

The California Office of Environmental Health Hazard Assessment (OEHHA) has developed a safe eating advisory for Lake Merced based on levels of mercury found in fish caught from this water body.

[3] Father Pedro Font, while on the de Anza Expedition to found the Presidio of San Francisco in March, 1776 wrote in his diary, "we saw a grove of live oaks near which is the Laguna de la Merced, where Captain Ribera stopped; and here we saw many bears (California Grizzly Bear)..."[4] At approximately 11pm of November 22, 1852, a shock was reported to have occurred by those in the areas around the Lake[5] and the following day reports were made that "...a fissure half a mile wide and three hundred yards long was discovered, through which the waters of Lake Merced were flowing to the sea."

Around this time, Spring Valley sold off some of its land on Lake Merced, making way for the golf courses that exist today.

The lake is fed by an underground spring, and at one time it did have an outlet to the ocean as shown on an 1869 United States Coast and Geodetic Survey Map.