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This study uses the Holocene lake sediment of Lake Ķūži (Latvia, Vidzeme Heights) for environmental reconstruction with multi-proxy records including lithology, computerised axial tomography scan, grain-size analysis, geochemistry, diatoms and macrofossils, supported by AMS radiocarbon dating. Numerical analyses (PCA; CONISS) reveal three main phases in the development of the lake. Response to the Lateglacial–Holocene transition in Lake Ķūži took place around 11,300 cal. BP. Organogenic sedimentation started with distinctive 5-cm-thick peat layer and was followed by lacustrine sedimentation of carbonaceous gyttja. Several findings of the peat layer with similar dated age and position at different absolute altitudes indicate that lake basin was formed by glaciokarstic processes. In the Early Holocene (until around 8,500 cal. BP), the lake was shallow and holomictic, surrounded by unstable catchment with erosion and inflow events. Predominance of diatom species of Cyclotella and Tabellaria, large numbers of respiratory horns of phantom midge pupae (Chaoboridae), high Fe/Mn ratio, as well as the presence of laminated sediments indicates the transition to a dimictic and oligo-mesotrophic lake conditions with high water level, anoxia in the near-bottom and stable catchment in the Middle Holocene (8,500–2,000 cal. BP). This contrasts with many hydrologically sensitive lakes in Northern and Eastern Europe in which the water level fell several meters during this period. During the Late Holocene (from 2,000 cal. BP to the present), the lithological and biotic variables reveal major changes, such as the increase in erosion (coarser grain-size fraction) and eutrophication [diatoms Aulacoseira ambigua (Grun.) Sim., Stephanodiscus spp., Cyclostephanos dubius (Fricke) Round]. Characteristics of lake-catchment system during the Late Holocene reflect anthropogenic signal superimposed on the natural forcing factors. To date, the Late Quaternary palaeolimnological reconstructions using lake sediment has been limited in the Baltic region. Therefore, findings from Lake Ķūži provide important information about environmental and climatic changes that took place in this part of Eastern Europe. This study shows that the relative importance of climate and local factors has varied over the time and it is essential to consider the lake basin topography, catchment size and land cover as potential dominant forcing factors for changes in sedimentary signal.