Environmental changes such as climate, land use, and fire activity affect terrestrial and aquatic ecosystems at multiple scales of space and time. Due to the nature of the interactions between terrestrial and aquatic dynamics, an integrated study using multiple proxies is critical for a better understanding of climate‐ and fire‐driven impacts on environmental change. Here we present a synthesis of biological and geochemical data (pollen, spores, diatoms, micro X‐ray fluorescence scanning, CN content, and stable isotopes) from Dove Lake, Tasmania, allowing us to disentangle long‐term terrestrial‐aquatic dynamics through the last 12 kyear. We found that aquatic dynamics at Dove Lake are tightly linked to vegetation shifts dictated by regional hydroclimatic variability in western Tasmania. A major shift in the diatom composition was detected at ca. 6 ka, and it was likely mediated by changes in regional terrestrial vegetation, charcoal, and iron accumulation. High rainforest abundance prior ca. 6 ka is linked to increased terrestrially derived organic matter delivery into the lake, higher dystrophy, anoxic bottom conditions, and lower light penetration depths. The shift to a landscape with a higher proportion of sclerophyll species following the intensification of El Niño‐Southern Oscillation since ca. 6 ka corresponds to a decline in terrestrial organic matter input into Dove Lake, lower dystrophy levels, higher oxygen availability, and higher light availability for algae and littoral macrophytes. This record provides new insights on terrestrial‐aquatic dynamics that could contribute to the conservation management plans in the Tasmanian World Heritage Area and in temperate high‐altitude dystrophic systems elsewhere.