We describe the depositional environments of the Cache, Lower Lake, and Kelseyville Formations in light of habitat preferences of recovered mollusks, ostracodes, and diatoms. Our reconstruction of paleoenvironments for these late Cenozoic deposits provides a framework for an understanding of basin evolution and deposition in the Clear Lake region. The Pliocene and Pleistocene Cache Formation was deposited primarily in stream and debris flow environments; fossils from fine-grained deposits indicate shallow, fresh-water environments with locally abundant aquatic vegetation. The fine-grained sediments (mudstone and siltstone) were probably deposited in ponds in abandoned channels or shallow basins behind natural levees. The abandoned channels and shallow basins were associated with the fluvial systems responsible for deposition of the bulk of the technically controlled Cache Formation. The Pleistocene Lower Lake Formation was deposited in a water mass large enough to contain a variety of local environments and current regimes. The recovered fossils imply a lake with water depths of 1 to 5 m. However, there is strong support from habitat preferences of the recovered fossils for inferring a wide range of water depths during deposition of the Lower Lake Formation; they indicate a progressively shallowing system and the culmination of a desiccating lacustrine system. The Pleistocene Kelseyville Formation represents primarily lacustrine deposition with only minor fluvial deposits around the margins of the basin. Local conglomerate beds and fossil tree stumps in growth position within the basin indicate occasional widespread fluvial incursions and depositional hiatuses. The Kelseyville strata represent a large water mass with a muddy and especially fluid substrate having permanent or sporadic periods of anoxia. Central-lake anoxia, whether permanent or at irregular intervals, is the simplest way to account for the low numbers of benthic organisms recovered from the Kelseyville Formation. Similar low-oxygen conditions for benthic life are represented throughout the sedimentary history of Clear Lake. Water depths for the Kelseyville Formation of 10 to 30 m and 12 m near the margins of the basin are inferred both before and after fluvial incursions. These water-depth fluctuations cannot be correlated with major climatic changes as indicated by pollen and fossil leaves and cones; they may be due to faulting in this technically active region.