Many volcanoes around the world host summit crater lakes but their influence on the overall stability of the edifice remains poorly understood. Here I use satellite radar data acquired by TerraSAR‐X from early 2015 to July 2017 over White Island, New Zealand, to investigate the interaction of the crater lake and deformation of the surrounding edifice. An eruption in April 2016 was preceded by a period of uplift within the crater floor and drop in the lake level. Modeling of the uplift indicates a shallow source located at ∼100 m depth in the vicinity of the crater lake, likely coinciding with the shallow hydrothermal system. In addition to the drop in the lake level, stress changes induced by the inflation suggest that the pressurization of the shallow hydrothermal system helped promote failure along the edge of the crater lake which collapsed during the eruption. After the eruption, and almost complete removal of the crater lake, large areas of the crater wall and lake edge began moving downslope at rates approaching 400 mm/yr. The coincidence between the rapid increase in the displacement rates and removal of the crater lake suggests that the lake provides a physical control on the stability of the surrounding edifice.