Lake Tana is the largest fresh water body situated in the north-western highlands of Ethiopia. In addition to its ecological services, it serves for local transport, electric power generation, fishing, recreational purposes, and source of dry season irrigation water supply. Evidence shows that the lake has dried at least once at about 15,000–17,000 before present owing to a combination of high evaporation and low precipitation events. Past attempts to understand and simulate historical fluctuation of Lake Tana based on simplistic water balance approach of inflow, outflow, and storage have failed to capture well-known events of drawdown and rise of the lake that have happened in the last 44 years. This study tested different stochastic methods of lake level and volume simulation for supporting Lake Tana operational planning decision support. Three stochastic methods (perturbations approach, Monte Carlo methods, and wavelet analysis) were employed for lake level and volume simulation, and the results were compared with the stage level measurements. Forty-four years of daily, monthly, and mean annual lake level data have shown a Gaussian variation with goodness of fit at 0.01 significant levels of the Kolmogorov–Smirnov test. The stochastic simulations predicted the lake stage level of the 1972, 1984, and 2002/2003 historical droughts 99% of the time. The information content (frequency) of fluctuation of Lake Tana for various periods was resolved using Wigner's Time-Frequency Decomposition method. The wavelet analysis agreed with the perturbations and Monte Carlo simulations resolving the time (1970s, 1980s, and 2000s) in which low frequency and high spectral power fluctuation has occurred. The Monte Carlo method has shown its superiority for risk analysis over perturbation and deterministic method whereas wavelet analysis reconstructed historical record of lake stage level at daily and monthly time scales. Copyright © 2012 John Wiley & Sons, Ltd.