The lake in front of the Temple of the Tooth was formerly a stretch of paddy fields known as Tigolwela. It was converted to a lake by King Sri Wickrama Rajasinha in 1807. As there had been a pond named <i>Kiri-muhuda</i> (a “sea of milk”) in the middle of the Tigolwela, the lake constructed subsequently too was named <i>Kiri-muhuda</i>. Deveda Moolacharya is considered the architect of the Kandy Lake. The king first built a dam across the paddy fields, starting from the Paththirippuwa (octagon) side, where the steps leading into the lake by the Mahamaluwa (Esplanade) are still visible, stretching across to the Poya-maluwa. The dam, upon which a roadway was constructed, allowed the king to go across to the Malwatte Vihare. According to D’Oyley, the dam was constructed between 1810–1812.

There are numerous local legends and folklore regarding the lake. One such is that the small island at its center was used by the king’s harem for bathing and was connected to the palace by a secret tunnel.