Watts Lake is a 0.38 km2 freshwater lake in the Vestfold Hills, East Antarctica (68°35′S 78°00′E) that was formerly a marine embayment. The water level of the lake is currently rising, it is now at -5.8 m altitude. The lake currently has a maximum salinity of 2.4 g 1-1 and no outlet. Abundant Holocene marine fossil molluscs, polychaetes and algae dated at 4700-8000 14C yr B.P. indicate that the lake was one basin of a complex marine inlet during the early to mid Holocene. A prominent terrace formed in the tide zone during this period. Processes involved in terrace formation are discussed using Watts Lake as an example. Other basins of this inlet have now become saline or hypersaline. Isostatic uplift isolated the whole inlet from the sea and allowed the basins to become separate lakes. From 3000-4000 14C yr B.P. copious volumes of freshwater from nearby stagnant ice and possibly from a major river system poured into Watts Lake displacing the salt water over a sill at the eastern end. Within 2000 yr the lake was fresh. Freshwater inflow declined and the lake level began to fall from evaporation. Cyanobacterial stromatolites formed from 2800 to 1700 14C yr B.P. at the eastern end of the lake. At least two other lakes in the Hills have similar histories.