Abstract Newberry Volcano in Oregon, USA, has two small crater lakes inside its caldera: East Lake and Paulina Lake. The 50–80 m deep lakes differ in morphology, water chemistry and sediment composition, although separated only by a narrow volcanic ridge. East Lake is a terminal lake with gaseous geothermal inputs, whereas Paulina Lake has an outlet (Paulina Creek) and subaqueous, high-alkalinity hot springs. The sediment in both lakes is organic-rich and mainly consists of diatom frustules (SiO 2) with some volcanic ash, accumulating at sedimentation rates of 1.5–2 mm a −1 (210 Pb dated). In Paulina Lake the sediment has up to 14% Fe 2 O 3 of hydrothermal origin and 250 ppm As. Sediment in East Lake is Fe-poor but has up to 4 ppm Hg, and fish are also Hg-rich. Both lakes host productive ecosystems, with primary producers using geothermal CO 2 , P and Si, and nitrogen fixed by cyanobacteria (Nostoc sp.). Water budgets and water residence times were calculated from stable isotope budgets. East Lake has a steep vertical δ 13 C (dissolved inorganic carbon, DIC) gradient, with surface δ 13 C values of up to 5.5‰, largely due to diffusional CO 2 losses and photosynthetic carbon withdrawal. Paulina Lake is better mixed, has a lower organic productivity and limited surface CO 2 evasion; its δ 13 C (DIC) gradient is small. We theorize that the lakes are fed by different geothermal components as a result of phase separation below East Lake. The gas component (CO 2 , H 2 S, Hg) enters East Lake, as indicated by the rising bubble trains in the lake. A residual fluid, depleted in Hg but rich in Si, Fe, carbonate, P and As, enters Paulina Lake. The presence of highly toxic components and the gas-charging of East Lake present natural hazards, which may change when new volcanic activity is initiated, and thus should be monitored.