This paper examines a southern Ontario kettle-hole peatland (Spongy Lake) to determine its hydrogeological linkage with local and regional water tables. The water table in the peat deposit and lake are perched 6 m above the regional aquifer, and there are strong lateral and downward hydraulic gradients. The horizontal hydraulic gradient (Δh/Δz) measured at the edge of the peatland ranged between 0.15 and 0.23 and the vertical gradient reached −1.24 (i.e., downward flow). At depths less than 1.0 m, saturated hydraulic conductivity (K_s) ranged from 10⁻⁷ to 10⁻⁵ m s⁻¹ and increased in magnitude with proximity to the peat surface. In an intermediate zone (1.0–4.0 m depth), K_s values ranged from 10⁻⁸ to 10⁻⁷ m s⁻¹, while deeper clay materials had K_s values ranging from 10⁻⁹ to 10⁻⁸ m s⁻¹. A clay layer directly below the deep peat limits downward seepage of water (one to two orders of magnitude less than evaporation). During periods of relatively high water, most seepage loss occurs laterally at the interface between mineral sediment and the peat. Spongy Lake is an important recharge zone for the regional aquifer, and the hydrologic and ecological integrity of the system should be protected.