Sedimentary diatoms have been used to quantitatively reconstruct climate-related variables, such as temperature at different timescales. Even though temperature is often less of a key driver of diatom ecology than other environmental parameters (water chemistry), diatom inference models have been shown to be reliable in deducing past temperature trends. In addition, the oxygen isotope composition (δ18Odiatom) preserved in buried diatom frustules has demonstrated its potential to reflect climatic and hydrological conditions at the time of frustule formation. This study combines results from both diatom-based climate proxies to reconstruct summer water and mean annual air temperatures, and hydrological trends in Nettilling Lake, Baffin Island, from ca. 5000 to 500 cal a bp. Diatom-inferred temperatures revealed an overall ca. 2 °C cooling throughout the Late-Holocene. The δ18Odiatom values showed an increasing trend up to ca. 1900 cal a bp, where they reached their highest values (+24.8‰ at 15 cm) and thereafter decreased to their lowest values (+21.4‰ at 4 cm). These trends were linked to meltwater inflows associated with Penny Ice Cap thaw rate that was in turn controlled by regional climatic conditions which went from intensified cooling during the Neoglacial period to slight warming thereafter. Our results suggest that diatom- and diatom-isotope-based temperature and hydrological reconstructions can identify trends related to the natural climate system variability. The diatom oxygen isotopes are useful for paleoenvironmental studies of terrestrial aquatic ecosystems, but not for all hydrological systems are the ideal temperature proxy. Hence, the combination of proxies helps to disentangle temperature and hydrological effects for paleoclimatic reconstructions and may support future studies of postglacial environmental change in northern lakes.