High-resolution paleoclimatic and paleoecologic datasets from a small lake in eastern Washington (USA) help elucidate Holocene environmental dynamics in the interior Pacific Northwest. Round Lake lies near the ecotone between sagebrush steppe and dry pine forest, making it highly sensitive to changes in precipitation-evaporation (P-E) balance. We present isotopic, sedimentological, and paleoecological data from a single sedimentary sequence analyzed at sufficient resolution to detect sub-decadal climatic variability. During the early Holocene (11,000–8500 cal yr BP), when summer insolation was higher than present, Round Lake experienced persistent aridity that led to reduced forest cover and small, probably frequent surface fires. Sub-centennial hydroclimate fluctuations during this period were muted, as indicated by low multi-decadal variability in δ18Ocarbonate records from the region. Oxygen isotopes indicate increased cool-season moisture during the middle Holocene (8500-5300 BP), but stratigraphic evidence suggests intermediate and variable lake levels. The deposition of the Mazama tephra (ca. 7600 cal yr BP) immediately preceded to a protracted expansion of steppe at the expense of forest. Increased hydroclimate variability and fire activity following ash deposition likely restricted conifer taxa even when elevated cool-season moisture would have facilitated their growth. The late Holocene was marked by persistently high lake levels, as indicated by the lithostratigraphic and pollen records. Comparatively large multidecadal variations in precipitation, which peaked during the last millennium, were also prominent features of late-Holocene hydroclimate, and may have been related to the strengthening of the El Niño Southern Oscillation and Pacific Decadal Oscillation. Pinus and Pseudotsuga show a 60–100 year lag in their response to hydroclimatic variations inferred from the oxygen isotope records. These results highlight how millennial-to-decadal scale hydroclimate conditions, along with abrupt landscape change, influence ecology in a water-stressed region of western North America.