It can store one third of the canal's annual water requirements for the operation of the locks.

Since the reservoir is not part of the navigational route, there are fewer restrictions on its water level.

The Madden Dam was built to prevent the occasionally torrential flow of the once wild Chagres River, which flows into the navigational route of Gatun Lake, and to control the water level of the lake during the dry season.

When completed, the dam and the reservoir behind it were named for the late US Representative Martin B. Madden (R-Illinois).

[citation needed] The reservoir was renamed Lake Alajuela after the Canal Zone reverted to Panamanian control at the end of 1999.