We describe the limnological changes between 1989 and 2006 in an urban, shallow lake, Laguna Alalay, located in the Andean valley of Cochabamba (Bolivia). Until 1960, water diversion to the lake was used to lower the inundation risk of Cochabamba city. In the 1980s and 1990s, the high waterfowl diversity and recreational services provided by the lake increased its conservation value. However, the population increase and the discharge of wastewater rich in nutrients increased eutrophication, and the lake became characterized by an annual alternation of submerged macrophytes and phytoplankton. The main aim of the present study is to analyze the response of the lake to manipulations implemented by local authorities: (a) sediment removal and accidental introduction of the exotic fish species Odontesthes bonariensis in 1997 and (b) manual mass removal of floating macrophytes during 2004–2006. The sediment removal and species introduction had several unpredictable consequences for the functioning of the lake, namely the transition to a permanent turbid water state and the persistent dominance of floating macrophytes. A general conclusion of our study is that any lake recovery measures in Bolivia should consider not only ecological, but also socio-economic and political aspects. Taking these into account, restoration of the submerged macrophyte-dominated state may not be that universally desirable as is widely held.