Watauga holds the distinction of being the highest reservoir (more than 1,900 feet above sea level) in the Tennessee River system. The reservoir is operated for many uses, including flood control, power generation, water quality, and aquatic ecology. Construction of the dam began in early 1942 but was curtailed later that year in favor of other wartime building efforts. Work resumed in 1946, and the dam was completed in 1948.

Surrounded by the Cherokee National Forest and flanked by the Appalachian Mountains, Watauga Reservoir is arguably the most scenic in the Tennessee River watershed. It offers access to the Appalachian Trail. Below Watauga Dam is a wildlife observation area where visitors have a chance to view unique species of waterfowl.