[citation needed] The dam and reservoir are located in the Diablo Range to the east of Pacheco Pass and about 10 miles (16 km) west of Los Banos.

Although the dam is located in the valley of San Luis Creek, the majority of its water comes from man-made aqueducts which are supplied from other rivers in Northern California.

It provides flexibility to the state water system by capturing, via pumps and canals, the wet season (November–April) runoff that would otherwise flow from the Sacramento–San Joaquin River Delta into the Pacific Ocean.

In recent years, a combination of drought and pumping restrictions enacted to protect endangered fish have contributed to low water levels at the San Luis Reservoir.

Both canals begin at the Clifton Court Forebay near Tracy, California where the Jones and Banks Pumping Plants draw water from the Delta in order to deliver it south.

The canals are linked to O'Neill Forebay, a small reservoir located directly in front of San Luis Dam where the water is temporarily stored for distribution.

[4] The sale of peaking power lowers the overall cost of operating the State Water Project, particularly the giant electric pumps along the California Aqueduct.

[11] During the dry summer months when surface water was frequently unavailable, farmers pumped vast volumes of groundwater to irrigate their crops, considerably depleting the regional aquifer.

The Bureau of Reclamation recognized the need for a large storage reservoir in order to provide a year-round water supply, and began studies for this project in 1955.

The state approached the federal government with an offer to design a joint-use facility; however it took several years for the Bureau of Reclamation to agree to the proposal.

On May 16, 1960, the state and the Bureau of Reclamation signed a "coordinated operation" agreement which laid out plans for the construction of joint-use facilities, including the San Luis Dam and Power Plant.

In front of a crowd of 15,000 people, President John F. Kennedy and California Governor Pat Brown gave the signal to detonate the first explosive charges in the San Luis dam site.

[11] The work force peaked at 2,304 in October 1965 and declined thereafter; in January 1968, with construction almost completed, the first water was delivered through the California Aqueduct to begin filling the giant reservoir.

[19] It also provides water for the Central Coast cities like San Luis Obispo and Santa Barbara via the Coastal Branch of the California Aqueduct.

The restrictions have led to frequent low water levels at San Luis Reservoir; in late summer 2016 it fell to 10 percent of capacity, the lowest since 1991.

The bill requires daily monitoring of fish to ensure environmental laws are not violated, instead of relying on hard limits which may not match current conditions.

"[25] In 2013, the Bureau of Reclamation proposed raising the BF Sisk Dam by 20 feet (6.1 m) to create about 130,000 acre-feet (160,000,000 m3) of extra storage capacity.

[26][27] The dam expansion is one of several major water projects that could be funded, in part, by a $2.7 billion bond measure approved by California voters in 2014.