It was formed mainly by water overflowing through the Owens River and which passed through Lake Searles into the Panamint Valley.

The town of Ballarat lies in the valley,[4] and California State Route 190 crosses the former lake basin in its northern sector.

[12] Volcanic activity between 7.7 and 4 million years ago preceded the opening of the valley, leaving basalts stranded on either side.

[13] Tufa deposits have been found in the Panamint Valley, some of which form fringing reefs[16] and algal mounds.

[19] Cobble beaches developed at the Nadeau Road and Lower Water Canyon localities,[17] while wave-cut terraces were identified close to Ballarat[15] and Big Four Mine Road and delta deposits close to Panamint Springs.

[30] When such overflow occurred is unclear[23] but apparently was restricted to oxygen isotope stage 6; during oxygen isotope stage 2 Lake Panamint was the terminal basin for the Owens River[2] and no overflow occurred after about 30,000 years before present.

[2] Various fish such as suckers (Catostomus) and Western chubs (Gila and Siphateles) inhabited the lake when it was overflowing.

During shallow water periods, foraminifera also populated the lake,[2] and the presence of diatoms and other planktonic fossils was reported already in the 1950s.

[6] During the most recent highstand of Lake Panamint, humans occupied its shorelines and left stone tools.

By 15,050 ± 80 years ago Lake Panamint began to recede as overflow from Searles ceased.