The river forms the short border between the states of Querétaro and Michoacán then flows west/northwest through the state of Guanajuato. After turning southward, the river separates Guanajuato and Michoacán, and Michoacán and Jalisco before flowing, after a course of about , into Lake Chapala, west-southwest of La Barca. It has a length of . When it empties into Lake Chapala, the system stands at above sea level.
The Lerma River/Lake Chapala basin is considered to be the most important watershed in the country by the federal government. With its major tributaries, the Laja, Apaseo, and Turbio the Lerma constitutes Mexico's largest river system. The Lerma River is not navigable by water craft, but it is critical to regional agricultural irrigation. In the Lerma River/Lake Chapala watershed, 52,125 of the total 78,000 (roughly 67%) farmers are classified as small farmers. Currently 820,000 hectares are irrigated and an estimated three million hectares are in agricultural production.
The population in the watershed as of 1997 was 9.35 million with an annual growth rate slightly less than the national average. The population is distributed among 6,224 localities; 18 of these have a population greater than 50,000 inhabitants. The rural population is currently 32 per cent. The Lerma's water is also a source for the municipal water supply in the Guadalajara and Toluca metropolitan areas. While water extration and use has been adequate for the region's larger population centers, rural areas have had chronic problems with access to potable water from the river and the aquifiers that feed it. Wells drilled into these aquifiers have very low yields.
The situation became extremely bad in the last 1980's because of erratic water policies that did little or nothing to regulate water use among competing interests and failed to consider the effects of upstream activties to those living downstream. Government plans were drawn up due to intense public pressure leading to improvement of the water quality in the 1990's. By 1997, 45 plants with a treatment capacity of 5.72 m3 s-1 were operating on a regular basis with an average running efficiency of about 70 per cent. Six further treatment facilities were under construction to raise the regional capacity to 9.56 m3 s-1. In Lake Chapala, which the Lerma River flows, water quality improved from 90% of the lake having poor water quality in 1989 to 85% of the lake having good quality in 1997. However, the worst water quality was still closest where the Lerma River discharged into the lake.
However, in the decade beginning in 2000, contamination levels of the river system have again become alarming, with studies in Michoacán and Guanajuato documenting an increase in cancer and neurocisticercosis in populations that live near the river. The Lerma River portion of the Lerma/Chapala basin is considered to be the most polluted, especially in stretches closest to its source near Almoloya del Río. Since 2005, industrial contaminants have become a serious concern as well as the continuing loss of plant life in and around the river itself. In 2005, thousands of fish suddenly died in the river in the municipality of Pénjamo in Guanajuato state when effluent flow depleted the oxygen in that part of the river. The lower parts of the river, closer to Lake Chapala are in better shape because there is less urbanization there.