Lugu Lake is a natural lake in the Hengduan Mountain System, and has a horseshoe shape. It is bounded within geographic coordinates of 27.683°N 100.75°E and 27.75°N 100.833°E. It is located in a high plateau amidst the Xiaoliangshan hills of Western Yunnan. The Lion Mountain that surrounds the lake, which is worshipped as the goddess Gammo, is the chief deity of the Mosuo people who inhabit the area. The lake has a drainage catchment of 171.4 square kilometres (66.2 sq mi). The lake's main storage is from rainfall and its waters display a turquoise blue colour. The south shoreline of the lake is located in Yi Autonomous region of Ningland. 

The lake has a length of 9.4 kilometres (5.8 mi) with a width of 8 kilometres (5.0 mi) (mean width is 5.2 kilometres (3.2 mi)) and a water spread area of 50 square kilometres (19 sq mi) (48.5 square kilometres (18.7 sq mi) is also mentioned) and an average depth of 45 metres (148 ft). The maximum depth in the lake is reported at 93.5 metres (307 ft) (90 metres (300 ft) is also mentioned in some references) which makes it the second deepest lake in China, after the Fuxianhu Lake. The lake is hemmed on both sides by steep mountains and partly forested slopes. The lake is fed by the Mosuo River and the outlet is the Gaizu River, which joins Yalong River and eventually into the Jingshajiang River or the Yangtze River. Geologically, it is inferred as one of the youngest fault lakes in the Yunnan Plateau.

The Gaizu River, flowing out of the lake at its southeast end, has a controlled outlet which is operated seasonally, only during the rainy season, and the rest of the time (September to May) it remains closed. The shore line is winding and has thus developed many beaches which have become popular tourist attractions. The lake waters exhibit transparency to a depth of 11 metres (36 ft). The lake has four prominent peninsulas and five islands. The five islands are: Heiwawu Island in the centre of the lake with a variety of birds living on it; Liwubi Island, Lige Island, Heiwawu Island, Liwubi Island, Nixi Island (the smallest island which has an oblong-shaped rock, covered by shrubs and moss); and the Lama Island. The three peninsulas and an island are linked to a seawall on the shore by a stone-paved path.

The shoreline of the lake is occupied by several ethnic minorities belonging to the Mosuo, Norzu, Yi, Pumi and Tibetan tribes. The lake is snowbound for three months a year, and the autumn and spring seasons bring a cool and dry climate, when the day temperatures are warm.

Important villages on the shore of the lake are Luoshui and Lige, which are both tourist centres. A walking tour along the periphery of the lake is a popular way of seeing the scenic beauty of the lake and its precincts.

Until 1982 there were no roads to the lake. The lake is 200 kilometres (120 mi) away from the Lijiang city, the headquarters of the Ninglang province, along a road that passes through some of the most scenic sights en route between Zhongdian and Dequin. The road, however, is affected by bad weather. The village roadhead on the shores of the lake that is connected with Lijiang city is known as Luoshui, a village, part of a larger Luoshui Administrative Village.

Luoshui village on the Yunnan side and Mukua village on the Sichuan side of the lake can be approached by canoes via the Lama Island. The canoes are known as "zhucaochuan" in the local language, which means the "pig-trough boats." The trek route, which is popular among Buddhist pilgrims, starts at Luoshoi and also ends there. Buddhism is prevalent around the lake, as the shores of the lake have Tibetan-type monasteries, mostly of the Gelugpa Order, established by the Tibeto Burman people who have settled around the lake; the important monasteries on the shore are: The Daming Gonpa or Yradzong Gonpa, Shubi Gonpa, Ozer Gonpa, Galong Gonpa and the Dzembu Monastery, the last named belongs to the Sakya Order.

The history of the place, however, is also well known for its matriarchal culture and also the dress of the Mosuo women and girls in particular, which is distinctly conspicuous for its maroon blouses and skirts that establish an aura of authority.