The upper Klamath Basin spans the California-Oregon border from the flank of the Cascade Range eastward to the Basin and Range Province, and encompasses the Klamath River drainage basin above Iron Gate Dam. Most of the basin is semiarid, but the Cascade Range and uplands in the interior and eastern parts of the basin receive on average more than 30 inches of precipitation per year. The basin has several perennial streams with mean annual discharges of hundreds of cubic feet per second, and the Klamath River at Iron Gate Dam, which represents drainage from the entire upper basin, has a mean annual discharge of about 2,100 cubic feet per second. The basin once contained three large lakes: Upper and Lower Klamath Lakes and Tule Lake, each of which covered areas of 100 to 150 square miles, including extensive marginal wetlands. Lower Klamath Lake and Tule Lake have been mostly drained, and the former lake beds are now cultivated. Upper Klamath Lake remains, and is an important source of irrigation water. Much of the wetland surrounding Upper Klamath Lake has been diked and drained, although efforts are underway to restore large areas. Upper Klamath Lake and the remaining parts of Lower Klamath and Tule Lakes provide important wildlife habitat, and parts of each are included in the Klamath Basin National Wildlife Refuges Complex.

The upper Klamath Basin has a substantial regional ground-water flow system. The late Tertiary to Quaternary volcanic rocks that underlie the region are generally permeable, with transmissivity estimates ranging from 1,000 to 100,000 feet squared per day, and compose a system of variously interconnected aquifers. Interbedded with the volcanic rocks are late Tertiary sedimentary rocks composed primarily of fine-grained lake sediments and basin-filling deposits. These sedimentary deposits have generally low permeability, are not good aquifers, and probably restrict ground-water movement in some areas. The regional ground-water system is underlain and bounded on the east and west by older Tertiary volcanic and sedimentary rocks that have generally low permeability. Eight regional-scale hydrogeologic units are defined in the upper Klamath Basin on the basis of surficial geology and subsurface data.

Ground water flows from recharge areas in the Cascade Range and upland areas in the basin interior and eastern margins toward stream valleys and interior subbasins. Ground water discharges to streams throughout the basin, and most streams have some component of ground water (baseflow). Some streams, however, are predominantly ground-water fed and have relatively constant flows throughout the year. Large amounts of ground water discharge in the Wood River subbasin, the lower Williamson River area, and along the margin of the Cascade Range. Much of the inflow to Upper Klamath Lake can be attributed to ground-water discharge to streams and major spring complexes within a dozen or so miles from the lake. This large component of ground water buffers the lake somewhat from climate cycles.

There are also ground-water discharge areas in the eastern parts of the basin, for example in the upper Williamson and Sprague River subbasins and in the Lost River subbasin at Bonanza Springs.

Irrigated agriculture is an integral part of the economy of the upper Klamath Basin. Although estimates vary somewhat, roughly 500,000 acres are irrigated in the upper Klamath Basin, about 190,000 acres of which are part of the Bureau of Reclamation Klamath Project. Most of this land is irrigated with surface water. Ground water has been used for many decades to irrigate areas where surface water is not available, for example outside of irrigation districts and stream valleys. Ground water has also been used as a supplemental source of water in areas where surface water supplies are limited and during droughts. Ground water use for irrigation has increased in recent years due to drought and shifts in surface-water allocation from irrigation to instream uses. The shifts in surface-water allocation have resulted from efforts to improve habitat for fish listed under the Federal Endangered Species Act.

The ground-water system in the upper Klamath Basin responds to external stresses such as climate cycles, pumping, lake stage variations, and canal operation. This response is manifest as fluctuations in hydraulic head (as represented by fluctuations in the water-table surface) and variations in ground-water discharge to springs. Basinwide, decadal-scale climate cycles are the largest factor controlling head and discharge fluctuations. Climate-driven water-table fluctuations of more than 12 feet have been observed near the Range, and decadal-scale fluctuations of 5 feet are common throughout the basin. Ground-water discharge to springs and streams varies basinwide in response to decadal-scale climate cycles. The response of the ground-water system to pumping is generally largest in areas where pumping occurs. Annual drawdown and recovery cycles of 1 to 10 feet are common in pumping areas. Long-term drawdown effects, where the water table has reached or is attempting to reach a new level in equilibrium with the pumping, are apparent in parts of the basin.

Since 2001, ground-water use in the upper Klamath Basin has increased by about 50 percent. Much of this increase has occurred in the area in and around the Bureau of Reclamation Klamath Project, roughly tripling ground-water pumping in that area. This focused increase in pumping has resulted in ground-water level declines in the pumped aquifer in excess of 10 to 15 feet over a large part of the Project between 2001 and 2004. If pumping rates of recent years are continued, the aquifer could achieve a new equilibrium; however, the final configuration of the water table (depth to water) and the spatial and temporal distribution of the resulting effects to streams are unknown. Historical water-level data suggest that the water table should recover from recent declines if pumping is reduced to pre-2001 rates.