The goal of this study is to define the role of lakes in the energy and water cycling of the lake-rich central Mackenzie River Basin and discuss the impacts of climate variability on the regional terrestrial water balance. This is pursued by synthesizing the results of measured data on a regional scale. Our results indicate that lake-rich regions are high energy landscapes in the thaw season. Lakes have larger net radiation and much larger water vapor fluxes and smaller sensible heat fluxes than their terrestrial surroundings. Energy exchange with the atmosphere is dominated by the annual evaporative heat flux. The presence of large lakes in a region substantially decreases the interannual variability in evaporation totals. A hypothetical region with no lakes shows a positive annual terrestrial water balance for wet and average precipitation years and only a small negative water balance for the driest years. The existing lake-rich region has a positive annual water balance only in the wettest years. Comparisons of the region with all small, all medium or all large lake scenarios indicates increased regional evaporation of 8% and 10% respectively for the latter two scenarios. Basin evaporation is a significant source for precipitation within the Mackenzie River Basin during the summer. It is hypothesized that fall and early winter evaporation from medium and large lakes enhances downwind snowfall. In response to climate warming, lake-rich high latitude basins will witness substantially increased annual evaporation.