The 402-foot (123 m) high earthen dam is situated in the foothills of the San Juan Mountains about 44 miles (71 km) upstream and east of Farmington, New Mexico.

The reservoir, Navajo Lake, is a popular recreation area and one of the largest bodies of water in New Mexico, with its upper portion extending into Colorado.

[4][5] Prior to the dam's construction, the San Juan River flow was high during spring snowmelt and summer monsoon, and a relative trickle at other times of the year.

Up to 1,320 cubic feet per second (37 m3/s) of water is released into the San Juan River via a 32 megawatt hydroelectric plant owned by the city of Farmington.

Hydropower generated at Navajo Dam serves about 37,000 customers in northwest New Mexico and averaged a production of 135,226,000 kilowatt hours for the period 1989–1999.

[11] The first studies for a dam on the San Juan River were made in 1904, but there was little need for such a project at the time, due to the remoteness of the area.

[12] The Navajo Nation's growing population was suffering from food and employment shortages, which the Bureau of Reclamation envisioned could be solved by a large irrigation project.

[8] The 1908 Supreme Court decision Winters v. United States ruled that a federally established Indian reservation was "entitled to the water needed to create a permanent homeland".

[23] A number of cracks and small slides developed in the dam after its construction in 1964, but were either repaired or settled by themselves without significant structural damage.

[25] The dam abutments and the spillway leaked considerably until the 1970s, when the Bureau of Reclamation finally took corrective action by installing drainage systems and placing stabilizing fill.

Construction began in 1976, but was halted when the National Wildlife Federation sued, citing that fluctuating power releases into the San Juan River could cause environmental damage.

However, in 1981 the city of Farmington applied to the Federal Energy Regulatory Commission for a permit to construct a private hydro power plant at the dam.

[31] Under natural conditions, the San Juan River supported native fishes including Colorado pikeminnow, razorback sucker and roundtail chub, but these have been largely been eliminated in favor of rainbow trout, non-native (introduced) brown trout and other salmonids which thrive in the cold water released from the base of Navajo Dam.

In combination, these mimic historic high and low flow conditions in the San Juan River before the dam was built.