The Tibetan Plateau, also known as the “Water Tower of Asia” because of its function as a water storage and supply region, responds dramatically to modern climate changes. Paleoecological shifts inferred from lake sediment archives provide essential insights into past climate changes, and the processes that drove those shifts. This is especially true for studies of lakes in endorheic basins on the Tibetan Plateau, where lake level is regulated predominantly by Monsoon intensity. Such water bodies provide excellent opportunities to reconstruct past changes in humidity. Most paleolimnological investigations of lakes on the Tibetan Plateau, however, have involved the study of a single sediment core, making it difficult to discern between changes caused by local events and those caused by lake-wide or regional processes. Here we present results from a paleolimnological study of Lake Taro Co, a currently closed-basin lake in Central Tibet. We compared a sediment record from the central part of the lake to a record from the near-shore area, and present results of sedimentological and bioindicator (chironomid, diatom, pollen) analyses from both records. Results show three periods of lake-wide ecosystem change (> ca. 5250, 5250–2250 and < since about 2250 cal year BP), which reflect a continuous drying trend throughout the Middle and Late Holocene. In addition to this lake-wide trend, we identified two local events in the sediment core from the southeastern, nearshore site. These include (1) a hiatus between 12,400 and 5400 cal year BP and (2) an 1800-year period of distinct paleoenvironmental conditions (5400–3600 cal year BP). We hypothesize that both events were caused by relocation of a river in the southeast sector of the lake’s catchment. We propose that the first relocation caused an erosion event that removed sediment, thereby producing the hiatus. During the following 1800 years, the core site may have been located on the river delta, before another river relocation at 3600 cal year BP established the modern prodelta situation. Our study demonstrates the value of using multiple sediment cores from a lake, to better identify processes that control widespread versus local events.