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As its name implies, Lakeville contains several lakes as well as smaller ponds and wetlands within its borders. The two largest lakes include Lake Marion and Orchard Lake, which are used heavily for recreation such as fishing, boating, and swimming. Smaller named natural lakes include Kingsley Lake and Lee Lake. Valley Lake is a small man-made lake in the northern part of the city.
A branch of the Vermillion River flows through Lakeville. Its headwaters are just west of the city limits in Credit River Township, and it flows eastward across Dakota County until it empties into the Mississippi River at the Wisconsin border. Much of Lakeville drains into the Vermillion River watershed. North Creek, a major tributary of the Vermillion, begins its flow in northern Lakeville and flows eastward to meet the Vermillion near downtown Farmington just east of Lakeville. The Vermillion River has been designated as a trout stream by the Minnesota Department of Natural Resources.