Regular observations of temperature, outflow rates and water chemistry of Crater Lake, Mt. Ruapehu, New Zealand have been made for the last 25 years. These data have been used to derive a model of the dynamics of the lake, and determine the input of energy, mass, and chloride from the volcano to the Crater Lake. The recent, relatively quiescent state of the volcano, when virtually no heat has been input to the lake, has also enabled an assessment to be made of the surface heat loss characteristics, which play an important role in the model of the lake. The modelling suggests that since about 1982 the ratio of the volcanic heat to mass added to the base of the lake is about 6 MJ/kg, which is not compatible with heating of the lake by magmatic steam alone. Thus, only about 50% of the heating has been by magmatic steam. It is suggested that heat could be transferred from a magmatic source to the region below the lake by a heat-pipe mechanism, commonly associated with geothermal systems. The simultaneous upward movement of vapour phase, and downward movement of liquid phase from condensed vapour allows efficient heat transfer without overall mass transfer. The permeability necessary to supply the required heat is of the order of 10 darcy, and is consistent with a rubble filled vent. For at least the last five years, there has been a characteristic pattern in the Crater Lake temperature record, with alternate heating and cooling phases. The heating phase generally lasts for one or two months, while the cooling phase lasts for six months to a year. A possible explanation for this cyclic behaviour is the presence of a layer of liquid sulphur under Crater Lake, acting as a partial barrier between the heat-pipe and the lake. The unusual variations of the viscosity of liquid sulphur with temperature will mean that at temperatures greater than 160°C, the layer of sulphur becomes highly viscous and would block any upwards steam flow and hence stop the heat input to Crater Lake, so producing a cooling phase. This blockage would last until the heating from below raised the temperature of the sulphur beyond the high-viscosity region, so gases could again pass through the sulphur.