Water on the Earth’s surface is an essential part of the hydrological cycle. Water resources include surface waters, groundwater, lakes, inland waters, rivers, coastal waters, and aquifers. Monitoring lake dynamics is critical to favor sustainable management of water resources on Earth. In cryosphere, lake ice cover is a robust indicator of local climate variability and change. Therefore, it is necessary to review recent methods, technologies, and satellite sensors employed for the extraction of lakes from satellite imagery. The present review focuses on the comprehensive evaluation of existing methods for extraction of lake or water body features from remotely sensed optical data. We summarize pixel-based, object-based, hybrid, spectral index based, target and spectral matching methods employed in extracting lake features in urban and cryospheric environments. To our knowledge, almost all of the published research studies on the extraction of surface lakes in cryospheric environments have essentially used satellite remote sensing data and geospatial methods. Satellite sensors of varying spatial, temporal and spectral resolutions have been used to extract and analyze the information regarding surface water. Multispectral remote sensing has been widely utilized in cryospheric studies and has employed a variety of electro-optical satellite sensor systems for characterization and extraction of various cryospheric features, such as glaciers, sea ice, lakes and rivers, the extent of snow and ice, and icebergs. It is apparent that the most common methods for extracting water bodies use single band-based threshold methods, spectral index ratio (SIR)-based multiband methods, image segmentation methods, spectral-matching methods, and target detection methods (unsupervised, supervised and hybrid). A Synergetic fusion of various remote sensing methods is also proposed to improve water information extraction accuracies. The methods developed so far are not generic rather they are specific to either the location or satellite imagery or to the type of the feature to be extracted. Lots of factors are responsible for leading to inaccurate results of lake-feature extraction in cryospheric regions, e.g. the mountain shadow which also appears as a dark pixel is often misclassified as an open lake. The methods which are working well in the cryospheric environment for feature extraction or landcover classification does not really guarantee that they will be working in the same manner for the urban environment. Thus, in coming years, it is expected that much of the work will be done on object-based approach or hybrid approach involving both pixel as well as object-based technology. A more accurate, versatile and robust method is necessary to be developed that would work independent of geographical location (for both urban and cryosphere) and type of optical sensor.