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Floods and droughts in the Mississippi River basin are perennial hazards that cause severe economic disruption. Here we develop and analyze a new lipid biomarker record from Horseshoe Lake (Illinois, USA) to evaluate the climatic conditions associated with hydroclimatic extremes that occurred in this region over the last 1,800 years. We present geochemical proxy evidence of temperature and moisture variability using branched glycerol dialkyl glycerol tetraethers (brGDGTs) and plant leaf wax hydrogen isotopic composition (δ²H_wax) and use isotope‐enabled coupled model simulations to diagnose the controls on these proxies. Our data show pronounced warming during the Medieval era (CE 1000–1,600) that corresponds to midcontinental megadroughts. Severe floods on the upper Mississippi River basin also occurred during the Medieval era and correspond to periods of enhanced warm‐season moisture. Our findings imply that projected increases in temperature and warm‐season precipitation could enhance both drought and flood hazards in this economically vital region.