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Lakes in the permafrost zone have been proposed to serve as key outlets for methane and carbon dioxide emissions. However, there has been no geological record of the hydrological and biogeochemical responses of lakes throughout the thawing of surrounding permafrost. We use multiple biomarker and isotopic proxies to reconstruct hydrological and biogeochemical changes in Lake Wudalianchi in northeastern China during regional thawing of the permafrost. We show permafrost thawing, as indicated by lignin degradation, initiated rapid lake water freshening as a result of the opening of groundwater conduits, and negative organic δ13C excursion due to increased inorganic and organic carbon fluxes. These hydrological changes were followed, with an ~5–7 yr delay, by abrupt and persistent increases in microbial lake methanotrophy and methanogenesis, indicating enhanced anaerobic organic decomposition and methane emissions from lakes as permafrost thaws. Our data provide a detailed assessment of the processes involved during permafrost thaw, and highlight the importance of lakes in ventilating greenhouse gases to the atmosphere.