About 3 to 3.5 million years ago, a system of north-south trending faults (fractures in the earth’s crust) began moving. The upward movement of the surrounding mountains and the downward fall of the valley bottom along these faults formed a basin that contained an ancestral Lake Tahoe. A much deeper body of water continued to form as the lake bottom fell. Approximately 2.5 million years ago, escaping water eroded through the volcanic edifice forming the existing lake outlet and Truckee River headwaters.
Fact credit: TahoeFacts.com