Abstract: In order to clarify the interaction of thermokarst lake and permafrost, a water-ice-heat coupling model considering heat conduction and convection processes was established at a typical thermokarst lake area in the Beiluhe Basin. The degradation characteristics of permafrost and the water balance of thermokarst lake were simulated. Furthermore, the effects of the geological environment and climate warming on permafrost and water balance of thermokarst lake were analyzed. Results showed that the permafrost around the thermokarst lake degraded gradually, resulting in a melt-through zone, causing the groundwater circulation mode to change. The thickness of the active layer was 3.35 m under the effect of the ground-surface temperature. Thermokarst lake exhibited a negative balance during the entire simulation period and its discharge increased significantly during the 285—388 years. Additionally, the formation permeability determined the development directions of thermokarst lake and ecological environment; climate warming accelerated the conversion of permafrost into seasonal frozen soil. This study can provide references to understanding of eco-hydrological processes in cold and arid regions.