East-Central Europe's largest shallow lake, Balaton, experienced strong eutrophication in the 1970–80s, followed by water quality improvement and oligotrophication by 2010 CE. Recently however, repeated cyanobacterial blooms occurred and warned that internal P-recycling can act similarly to external P load, therefore we need a better understanding of past water level (WL) and trophic changes in the lake. In this study we discuss the last 500-yr trophic, WL and habitat changes of the lake using paleoecological (chironomids, pollen) and geochemical (sediment chlorophyll, TOC, TS, TN, C/H ratio, major and trace element) methods. We demonstrate that the most intensive and irreversible change in the macroinvertebrate fauna occurred during the period of economic boom between the First and Second World War (∼1925–1940 CE), when large-scale built-in and leisure use of the lake has intensified. At that time, the Procladius-Microchironomus-Stempellina dominated community transformed to Procladius-Chironomus plumosus-type-Microchironomus community that coincided with land use changes, intensified erosion and water-level regulation in the lake with the maintenance of year-round high WL. This was followed by the impoverishment and population size decrease of the chironomid fauna and Procladius dominance since 1940 CE, without any recovery after 1994 CE despite the ongoing oligotrophication. Accelerated rate of change and turnover of the fauna was connected to an increase in the benthivorous fish biomass and eutrophication. The basin lost almost completely its once characteristic Stempellina species between 1927 and 1940 CE due to trophic level increase and seasonal anoxia in the Szemes Basin. Reference conditions for ecosystem improvement were assigned to 1740–1900 CE. We conclude that in spite of the ongoing oligotrophication, the re-establishment of the Procladius-Microchironomus-Stempellina assemblage is hampered, and requires fish population regulation.