Mountain Lake, Florida, is augmented with water pumped from the underlying Floridan aquifer to maintain the water level, and a detailed 1990 water budget was developed for this lake to determine how the lake interacts with the surrounding groundwater system. Groundwater interaction with the lake was calculated from flow-net analysis of surficial well data, seepage meter data, and the residual of the water budget equation. Strong leakage through the lake bottom was observed, primarily controlled by the head difference between the lake and the Floridan aquifer and the sediment hydraulic leakance (sediment hydraulic conductivity/thickness). Areas of seepage into the lake (15% of the lake area) were observed at possible sinkhole features in the central portion of the lake. Areas of strong leakage occurred in shore areas where steep outflow gradients and sandy sediments existed. Results from this study indicate that the lake recycles groundwater, as the equivalent of over 90% of augmentation water returns to the groundwater system. Water budget data from this lake dispute the public perception in Florida that lake augmentation is a wasteful practice.