The descendants of European settlers began coming to the area of the lake in the early 20th century, first using it as a staging area for bush pilots flying to mining camps and settlements further north. In the mid-1930s, abundant gold deposits in the area triggered the establishment of Yellowknife as a permanent settlement. While at the time development was concentrated on the peninsula extending into Great Slave Lakes Yellowknife Bay, an area known today as Old Town, later analysis of lake sediments lends some support to accounts from that time of Frame Lake being used for the disposal of tailings and sewage from outlying mines. The lake took its name from Bill Frame, an early miner who owned part of the citys bus and taxi franchise.
Yellowknifes growth was briefly interrupted by World War II, but when it resumed afterwards, the higher ground closer to the lake was chosen for expansion. The area just east of the lake became New Town, today the citys downtown. McNiven Beach, named after the city's first mayor, was developed with facilities for swimming; sometimes floatplanes landed nearby as well. Residents also went boating on the lake.
At the same time, runoff from storms carried increasingly nutrient-rich waters into the lake. In colder months when the lake surface was not frozen over, the city dumped plowed snow into the lake, adding even more nutrients. Sewage dumped into nearby Niven Lake, heavily used for that purpose for almost 35 years of Yellowknife's postwar growth, may also have flowed into Frame, offering more nutrients.
By the early 1970s the lakes decline had been noted. A later study by the earth science department at Carleton University concluded that the 1970 construction of the causeway across the end of the lakes eastern arm was the "tipping point" for Frame Lake. It cut off the stream between it and Niven Lake to the north, the only outlet the lake had had during human habitation of the area. With the lack of water throughput, nutrient levels in the water column rose, nurturing aquatic plants during the summertime. In the winter, however, when the lake froze over and snow cover blocked much of the limited sunlight available, those same plants died off for lack of ability to photosynthesize. The decomposed plant matter began accumulating on the lake floor, steadily deoxygenating its waters.
In a 1973 limnological study of seven lakes in the Yellowknife area, including Frame, for a possible experimental fishery, scientists from the Fisheries Research Board noted that Frame was the only one in which they were unable to catch any fish for study. Over the preceding winter, they also observed that the lake had "become rapidly anoxic".
As the lake declined, development came closer. Yellowknife built its current city hall by the lake edge in 1975, and the Prince of Wales Northern Heritage Centre, the territorial museum, followed nearby four years later. Sometime later that decade, the number of swimmers at McNiven Beach declined sufficiently for the city to remove the facilities there, as the beach itself began to grow over with grass.
Residents were still swimming and boating in the lake in the early 1980s, but in smaller numbers. Some were scared off by reports of leeches that had in one instance supposedly covered an entire child. A local journalist recalled in 2015 how he had had to watch his step to avoid deep, malodorous deposits while catching tadpoles in the shallow waters near his home at that time. Later the Frame Lake South area was developed for residential and commercial use as the city grew. Storm sewers installed for these projects diverted the runoff that had once fed the lake, increasing the concentration of nutrients in the water.