It is located west of Huntsville. The Bent River flows from the lake into Skeleton Bay on Lake Rosseau. Up until 1991, the Ministry of Natural Resources operated a fish hatchery on the lake. The lake is thought to have been formed as a result of a meteorite impact. About 800 million years ago, an asteroid impact is suspected to have created a crater much larger than the remnant lake. Periods of glaciation since then have removed the original crater, leaving a lake approximately 2.2 miles across and 100 meters deep at its center. Skeleton Lake is recognized as a suspected impact crater. Ironclad evidence of the impact hypothesis would have been removed during the ice ages, and unless more shock geomorphology is found the crater's origin cannot be certified beyond a reasonable doubt. The limestone base of the lake makes the waters some of the clearest in all of the Muskokas. On a calm day it is possible to see up to 30 meters underwater with the naked eye.
Skeleton Lake is so named because when surveyors were working on the north shore, they came upon two skeletons resting on the rocks. When they asked a local Indian chief where the skeletons came from, they were told that he and his people had camped one winter on Skeleton Lake. When food became scarce the tribe decided to move elsewhere. One mother, with a fourteen-year-old son too weak to move, refused to accompany them. They died together of starvation, and the lake was named in memory of this mother and her son.
The open body of water in Skeleton Lake is the largest open body of water in all the Muskoka Lakes. This makes it an excellent lake for such sports as sailing and windsurfing.
Skeleton Lake has two great islands for public use. The Hog's Back is a tiny rock with lots of graffiti and a fire pit near Greer Bay. Anderson's island has a population of silver birches.
Skeleton Lake is home to Camp Kwasind, a Christian camp founded in 1944 in Cheboygan bay. It is also home to Camp Ramah in Canada, a Jewish summer camp.