Lake Dian, the largest lake on South China’s Yunnan-Guizhou Plateau, exhibits two abnormal funnel-like features in the deepest part of the lake. Nevertheless, how and when these funnels formed and their implications and potential environmental and ecological effects remain unclear. To address these questions, we carried out a detailed multi-method survey including underwater topographic monitoring, extraction of sediment records, and geophysical exploration across the funnel areas. Sediment records revealed a significant sedimentation hiatus around these features. For example, sediments with thicknesses of ca. 69.24 cm and 83.56 cm in cores D4 and D6 were eroded based on the calculated of sedimentation rates. Deformed sedimentary structures and a hiatus, together with large-scale funnel-shaped topography, prove that underlying karst collapse may trigger massive water outflow through these funnels, which could result in an erosional hiatus in the local lakebed. Continuous clay deposits in the upper part of the sedimentary column suggest that water leakage may have ceased since the 1930s. However, bathymetric surveys conducted in October 2015 and September 2019 indicated that the maximum lake depth increased by 0.97 m and 0.2 m in the large and small funnels, respectively, over this 4-year period. The corresponding increased volumes were 1520 m3 and 375 m3 in the large and small funnels, respectively. Numerous pits were distributed around the funnels. Cumulatively, these underwater topographic changes reveal that small-scale, slow water leakage has been developing, which could potentially trigger catastrophic water discharge due to increasing hydraulic pressure and/or underlying karstification. If catastrophic water outflow occurs, ~14.05 × 108 m3 of highly polluted water would not only contaminate the upper reaches of the large river and/or the lake itself, but would also endanger regional water security and induce widespread negative ecological impacts.