Estimates of past lake‐water salinity from fossil diatom assemblages were used to infer past climatic conditions at Moon Lake, a climatically sensitive site in the northern Great Plains. A good correspondence between diatom‐inferred salinity and historical records of mean annual precipitation minus evapotranspiration (P ‒ ET) strongly suggests that the sedimentary record from Moon Lake can be used to reconstruct past climatic conditions. Century‐scale analysis of the Holocene diatom record indicates four major hydrological periods: an early Holocene transition from an open freshwater system to a closed saline system by 7300 b.p., which corresponds with a transition from spruce forest to deciduous parkland to prairie and indicates a major shift from wet to dry climate; a mid‐Holocene period of high salinity from 7300 to 4700 b.p., indicating low effective moisture (P ‒ ET); a transitional period of high salinity from 4700 to 2200 b.p., characterized by poor diatom preservation; and a late Holocene period of variable lower salinity during the past 2,200 yr, indicating fluctuations in effective moisture.