Formally part of the Red River, as sediment settled it got slowly got cut off to create its own lake.
At the end of the Le Dynasty the mouth of the Red River was sealed and a dyke was built to separate the area into two lakes. The other was filled in and what remained is Hoan Kiem Lake.
Originally it was a very large lake, and linked to the Red River via the To Lich River, Hanoi was serviced with small boats that ran up and down a series of canals. Narrow roads and wooden bridges connected it to other parts of the city and the numerous temples.
The Lake was the hub, houses surrounded it where farmers grew fruit and vegetables, they farmed fish, grew rice, kept chickens etc.
The Colonial Administration was all about town planning so they developed the Lake area, into a more organised area to reflect life back in Europe.