Shell Lake is a relatively shallow terminal lake (tributaries but no outlets) in northwestern Wisconsin that has experienced approximately 10 feet (ft) of water-level fluctuation over more than 70 years of record and extensive flooding of nearshore areas starting in the early 2000s. The City of Shell Lake (City) received a permit from the Wisconsin Department of Natural Resources in 2002 to divert water from the lake to a nearby river in order to lower water levels and reduce flooding. Previous studies suggested that water-level fluctuations were driven by long-term cycles in precipitation, evaporation, and runoff, although questions about the lake’s connection with the groundwater system remained. The permit required that the City evaluate assumptions about lake/groundwater interactions made in previous studies and evaluate the effects of the water diversion on water levels in Shell Lake and other nearby lakes. Therefore, a cooperative study between the City and U.S. Geological Survey (USGS) was initiated to improve the understanding of the hydrogeology of the area and evaluate potential effects of the diversion on water levels in Shell Lake, the surrounding groundwater system, and nearby lakes. Concerns over deteriorating water quality in the lake, possibly associated with changes in water level, prompted an additional cooperative project between the City and the USGS to evaluate efeffects of changes in nutrient loading associated with changes in water levels on the water quality of Shell Lake. Numerical models were used to evaluate how the hydrology and water quality responded to diversion of water from the lake and historical changes in the watershed. The groundwater-flow model MODFLOW was used to simulate groundwater movement in the area around Shell Lake, including groundwater/surface-water interactions. Simulated results from the MODFLOW model indicate that groundwater flows generally northward in the area around Shell Lake, with flow locally converging toward the lake. Total groundwater inflow to Shell Lake is small (approximately 5 percent of the water budget) compared with water entering the lake from precipitation (83 percent) and surface-water runoff (13 percent). The MODFLOW model also was used to simulate average annual hydrologic conditions from 1949 to 2009, including effects of the removal of 3 billion gallons of water during 2003–5. The maximum decline in simulated average annual water levels for Shell Lake due to the diversion alone was 3.3 ft at the end of the diversion process in 2005. Model simulations also indicate that although water level continued to decline through 2009 in response to local weather patterns (local drought), the effects of the diversion decreased after the diversion ceased; that is, after 4 years of recovery (2006–9), drawdown attributable to the diversion alone decreased by about 0.6 ft because of increased groundwater inflow and decreased lake-water outflow to groundwater caused by the artificially lower lake level. A delayed response in drawdown of less than 0.5 ft was transmitted through the groundwater-flow system to upgradient lakes. This relatively small effect on upgradient lakes is attributed in part to extensive layers of shallow clay that limit lake/groundwater interaction in the area. Data collected in the lake indicated that Shell Lake is polymictic (characterized by frequent deep mixing) and that its productivity is limited by the amount of phosphorus in the lake. The lake was typically classified as oligotrophic-mesotrophic in June, mesotrophic in July, and mesotrophic-eutrophic in August. In polymictic lakes like Shell Lake, phosphorus released from the sediments is not trapped near the bottom of the lake but is intermittently released to the shallow water, resulting in deteriorating water quality as summer progresses. Because the productivity of Shell Lake is limited by phosphorus, the sources of phosphorus to the lake were quantified, and the response in water quality to changes in phosphorus inputs were evaluated by means of eutrophication models. During 2009, the total input of phosphorus to Shell Lake was 1,730 pounds (lb), of which 1,320 lb came from external sources (76 percent) and 414 lb came from internal loading from sediments in the lake (24 percent). The largest external source was from surface-water runoff, which delivered about 52 percent of the total phosphorus load compared with about 13 percent of the water input. The second largest source was from precipitation (wetfall and dryfall), which delivered 19 percent of the load compared to about 83 percent of the water input. Contributions from septic systems and groundwater accounted for about 3 and 2 percent, respectively. Increased runoff raises water levels in the lake but does not necessarily increase phosphorus loading because phosphorus concentrations in the tributaries decline during increased flow, possibly because of shorter retention times in upstream wetlands. Phosphorus loading to the lake in 2009 represented what occurred after a series of dry years; therefore, this information was combined with data from 2011, a wet year, to estimate phosphorus loading during a range of hydrologic conditions by estimating loading from each component of the phosphorus budget for each year from 1949 to 2011. Comparisons of historical water-quality records with historical water levels and applications of a hydrodynamic model (Dynamic Lake Model, DLM) and empirical eutrophication models were used to understand how changes in water level and the coinciding changes in phosphorus loading affect the water quality of Shell Lake. DLM simulations indicate that large changes in water level (approximately 10 ft) affect the persistence of stratification in the lake. During periods with low water levels, the lake is a well-mixed, polymictic system, with water quality degrading slightly as summer progresses. During periods with high water levels, the lake is more stratified, and phosphorus from internal loading is trapped in the hypolimnion and released later in summer, which results in more extreme seasonality in water quality and better clarity in early summer. Results of eutrophication model simulations using a range in external phosphorus inputs illustrate how water quality in Shell Lake (phosphorus and chlorophyll a concentrations and Secchi depths) responds to changes in external phosphorus loading. Results indicate that a 50-percent reduction in external loading from that measured in 2009 would be required to change phosphorus concentrations from 0.018 milligram per liter (mg/L) (measured in 2009) to 0.012 mg/L (estimated for the mid-1800s from analysis of diatoms in sediment cores). Such reductions in phosphorus loading cannot be accomplished by targeting septic systems or internal loading alone because septic systems contribute only about 3 percent of the phosphorus input to the lake, and internal loading from the sediments of Shell Lake contributes only about 25 percent of phosphorus input. Complete elimination of phosphorus from septic systems and internal loading would decrease the phosphorus concentrations in the lake by 0.003–0.004 mg/L. Therefore, reducing phosphorus concentration in the lake more than by 0.004 mg/L requires decreasing phosphorus loading from surface-water contributions, primarily runoff to the lake. Reconstructed changes in water quality from 1860 to 2010, based on changes in the diatom communities archived in the sediments and eutrophication model simulations, suggest that anthropogenic changes in the watershed (sawmill construction in 1881; the establishment of the village of Shell Lake; and land-use changes in the 1920s, including increased agriculture) had a much larger effect on water quality than the natural changes associated with fluctuations in water level. Although the effects of natural changes in water level on water quality appear to be small, changes in water level do have a modest effect on water quality, primarily manifested as small improvements during higher water levels. Fluctuations in water level, however, have a larger effect on the seasonality of water-quality patterns, with better water quality, especially increased Secchi depths, in early summer during years with high water levels.