The Maori legends state that the giant Matau was burnt to death in his sleep after he abducted a chief's daughter, burning a massive hole in the ground and melting the ice and snow of the surrounding mountains, forming the lake. The lake is a large "S" shape, like a giant, curled up and sleeping on its side. Matau's head rested at Glenorchy, at the north of the lake, and his feet south in Kingston. Queenstown sits on Matau's knee. One of Wakatipu's mysteries is the rise and fall of the lake by about 12cm (5") every five minutes. Legend states that a Giant's heart is impossible to destroy, and causes this rise and fall, while science says it is due to fluctuating atmospheric pressures. But across the lake from the town below Cecil Peak is a little island visible only from up close, from above, or from a different angle. Some say Hidden Island is the still beating heart of the Giant Matua. The Maori people first inhabited the area in a search for food, ponamu or greenstone, and the flightless Moa. The north of the Lake is one of six of the country's main sources of greenstone.

Lake Wakatipu and the places nearby (Remarkable Mountains, Deer Park, Queenstown and Glenorchy) were the filming locations for many scenes in The Lord of the Rings movie. The road from Queenstown to Glenorchy is rated as one of the top scenic drives in the world and the most beautiful road in New Zealand.