Lake Tyrrell, a saline playa in semi‐arid north‐western Victoria, records a long history in which a succession of lacustrine and aeolian environments can be related to past hydrologic variations. Cores through the saline evaporitic facies reveal a vertical pattern reflecting cyclic changes through time. Detrital clastics predominated during deep‐water lacustral phases; evaporites were deposited during drying phases. A model, depicting surface‐groundwater interaction during discrete stages of a typical cycle, relates changes in water depth, salinity and typical depositional facies. On the drying trend, the sequence evolves through carbonate to sulphate deposition. Progressive reduction in water level results in partial drying and production of the groundwater outcrop playa stage. Salt efflorescence and production of detrital pelletal clays provide parent materials for aeolian transport and dune building. Any additional fall in watertable permits downward leaching of salts, plant colonization of the lake floor and associated soil development. Facies variations reveal four hydrologic cycles within this saline sequence reflecting major climatic events in the Brunhes normal chron. The modern playa‐salina phase represents a relatively late stage development. The mineral suite, including dolomitic carbonate, sulphide and gypsum‐clay laminites, formed in this continental setting closely resembles facies described from coastal sebkhas, highlighting the problem of distinguishing between the origins of similar deposits in the ancient record.