This is the largest of more than 200 lakes within the Olallie Lake Scenic Area. Located on the southern edge of the Mt. Hood National Forest it is a popular summer recreational destination for people from Portland and Salem, Ore. There are three campgrounds and a rustic cabin resort on this lake as well as a hiking trail that encircles the perimeter. Yurts, cabins, and boat rentals are available at Olallie Lake Resort.

There is a boat ramp at Peninsula Campground on the southwest shore of the lake. Camping is also available at Olallie Meadows Campground and Paul Dennis Campground. Olallie Lake is also a popular jumping off point for backpackers who want to fish the surrounding high lakes or access the Pacific Crest Trail.