The crater of Apoyo was formed approximately 23,000 years ago, after a strong volcanic explosion which left a hole measuring six kilometers in diameter. Time went by and subterranean waters and rain filled the crater and the slopes became covered by vegetation.

Today this crater is considered to be a sleeping volcano, in repose, with certain volcanic activity still present through a few hot springs in its interior.As part of the Nicaraguan volcanic chain, Apoyo is located between the Mombacho Volcano in the south and the Masaya Volcano in the north.

The Apoyo lagoon has a surface of 2,110 hectares. It is very deep: according to investigations the lowest level of the conic hole is 100 meters underneath the sea level and the shore of the lagoon is 75 meters above sea level. The water is the most crystal-clear out of all fresh water bodies in Nicaragua and possibly in Central America.