Lake Belle Taine (480 ha) in north central Minnesota receives on average 76,000 m3 d−1 of water from Little Sand Creek but has no outlet. Water seeps out of the lake, flows through glacial outwash, and discharges into three nearby lakes with stages 13–14 m lower than Belle Taine. Seepage‐meter data indicate water is seeping out of Belle Taine at velocities up to 263 cm d−1 . Hydraulic‐head measurements made in the lake bed indicate the sediments are unsaturated beneath a portion of the lake edge, and a wedge of unsaturated sediments extends beneath the lake bed as much as 20 m from the shoreline. At the shoreline the water table is as much as 6.7 m below the lake surface. Modeling results of a similar hypothetical setting indicate that the horizontal extent of an unsaturated zone beneath a lake depends on (1) the permeability contrast between the outwash and the lake bed, (2) anisotropy, (3) lake bed slope, and (4) thickness of the lower‐permeability lake bed sediments. Although rarely documented, unsaturated sediments beneath a lake may not be extremely uncommon. Similar, much smaller unsaturated‐zone areas also have been observed beneath two other lakes in Minnesota.