According to Caddo legend, the lake was formed by the 1811–12 New Madrid earthquakes. There may be some truth to the legend, as Reelfoot Lake in Tennessee was formed by that earthquake. Most geologists feel the lake was formed, either gradually or catastrophically, by the “Great Raft”, a 100-mile (160-km) log jam on the Red River in Louisiana, possibly by flooding the existing low-lying basin.
The Channel was used by Steamboats to reach the port at Jefferson, until water levels fell after the removal of the Great Raft.
Caddo Lake has been utilized by Native Americans for thousands of years, but substantial commercial development would only begin with invention of the steamboat and US annexation of Louisiana and Texas by treaty (Texas is the only State in the United States to have joined by treaty instead of annexation) in the 19th century. The cities of Port Caddo, Swanson’s Landing, and Jefferson in Texas, and Mooringsport in Louisiana, had thriving riverboat ports on the lake. Gradually as the log jams were removed in the lake and the Red River by Captain Henry Miller Shreve and then by the Army Corps of Engineers, the lake changed shape and eventually fell over ten feet, destroying the East Texas ports and their riverboat industry.
Industry once again came to Caddo Lake with the discovery of oil beneath it. The world’s first over water oil platform was completed in Caddo Lake in 1911. The Ferry Lake No. 1 was erected by Gulf Refining Company. The well bottomed at 2,185 feet (666 m) and produced 450 barrels per day
Oil derricks sprang up throughout the lake, around the turn of the 20th century, further damaging the fragile ecosystem. The oil industry left Caddo for richer fields at Kilgore and other locations in Texas. Texas tried to preserve parts of Caddo in 1934 by establishing a state park, constructed by the WPA. The establishment of the Longhorn Army Ammunition Plant on the shores of Caddo, in the mid-20th century, polluted large portions of the surrounding wetlands until its closure in the 1990s. Most of the former plant site is now a federal wildlife refuge.
An ecologist named Lionel Janes conducted a survey of Caddo Lake (called Ferry Lake at the time) in 1913 and 1914. Based on an examination of cross sections of bald cypress and hardwood trees and many dead stumps he estimated that the lake came into existence sometime between 1770 and 1780.