Erhai Lake is a barrier lake formed after a fault foundering of the earth's crust. It originates in Heigushan Mountain of Er'yuan. The water mainly comes from the Miju River and Luoshi River in Er'yuan County, the 18 brooks of Cangshan in the west, and the Boluo River, Fengwei Brook, Yulong Gully and Shitou Brook in the southeast, which converge into a mighty torrent and then flow into Erhai Lake. After that, it again flows into the Lancangjiang River by passing through Tianshengqiao (Natural Bridge) of Xiaguan, where a multistage power station of medium size stand, and the Yangbi River in the west over a distance of more than 20 km.

The beautiful scenery and limpid waters of Erhai Lake are charming and attractive. On the boundless expanse of the lake, there are steamers, sailing boats, flying birds, the Three Islets, the Four Sand Bars, the Five Miniature Lakes and the Nine Curvatures, with their reflections in the placid water, accompanied by Bai girls in bright-coloured costumes on the shore or in fishing boats singing the praises of their life. The picturesque scenery makes you feel relaxed and happy. The white snow over the green Cangshan Mountain and the limpid water of Erhai Lake have earned Dali the fame of "Jade Erhai and Silver Cangshan." During a clear night, the moon is mirrored in the lake and people call it the "Erhai Moon" which is one of the four best sights of Dali. It would be a great pity if people travelling to Dali do not go for a boat ride in the lake, just like people travelling to Kunming without having a glance at the scenery of Xishan (the Western Hills).