The lake was created in 1816 when the Laurel Creek, then called Beaver Creek, was damned by Abraham Erb. Used as a grist mill pond, its creation slowed the flow of water through the Laurel Creek watershed, causing a buildup of sediment from upstream. The problem was exacerbated in 1895 when local residents successfully petitioned the Grand Trunk Railway to extend the Waterloo line to Elmira. A right of way across the mill pond was purchased from William Snider, decreasing the size of the lake and increasing the presence of sediment deposits. In 1994 Waterloo city council approved the undertaking of $100,000 environmental assessment of the lake by the Grand River Conservation Authority. At the time the lake it was referred to by locals as Mud Lake due to a widespread sediment build up and was viewed as a flood risk. Councillor Tricia Siemens explained was quoted The Record as saying: "The flood control area is ancient. There could be billions of dollars in property damage if there's a major flood. We could be heading for a disaster." The need for a rehabilitation plan was further underscored in August 1995 when several hundred waterfowl, predominantly ducks, died from botulism, the result of extreme temperatures and excrement build up in the shallow, sediment clogged lake. Waterloo settled on a seven-year plan to restore the lake following a two-hour council discussion about costs and timelines in November 1995. The plan included the dredging of the lake and the introduction of a cascading outlet, along with new walking amenities and general environmental improvements By 1997 plans were underway to rehabilitate the area including the creation of wetland and wildlife habitats and the rehabilitation of mudflats. A boardwalk, gazebos and lighting along walkways were introduced along the lake in 2000. Redevelopment of Silver Lake and the surrounding area were announced in September 2019, with $9 million budgeted to introduce a new promenade and boardwalk, as well as reshape and in some cases naturalize areas around the Lake and the Laurel Creek. The project will include land vacated by the 2019 closure of the Lions Lagoon splash pad. Waterloo Park is located on land that was initially part of Waterloo Township, one of the five townships within Waterloo Country, and is today known as Waterloo, Ontario. It is situated on land historically referred to as Block 2 of the Haldimand Tract, land granted to the Haudenosaunee Six Nations (Iroquois) who had served on the British side during the American Revolution as part of the "Haldimand Proclamation".