Data collected in 4 years of field observations were used in conjunction with continuous simulation models to study, at the small-basin scale, the water balance of a closed catchment-lake system in a semi-arid Mediterranean environment. The open water evaporation was computed with the Penman equation, using the data set collected in the middle of the lake. The surface runoff was partly measured at the main tributary and partly simulated using a distributed, catchment, hydrological model, calibrated with the observed discharge. The simplified structure of the developed modelling mainly concerns soil moisture dynamics and bedrock hydraulics, whereas the flow components are physically based. The calibration produced high efficiency coefficients and showed that surface runoff is greatly affected by soil water percolation into fractured bedrock. The bedrock reduces the storm-flow peaks and the interflow and has important multi-year effects on the annual runoff coefficients. The net subsurface outflow from the lake was calculated as the residual of the lake water balance. It was almost constant in the dry seasons and increased in the wet seasons, because of the moistening of the unsaturated soil. During the years of observation, rainfall 30% higher than average caused abundant runoff and a continuous rise in the lake water levels. The analysis allows to predict that, in years with lower than the average rainfall, runoff will be drastically reduced and will not be able to compensate for negative balance between precipitation and lake evaporation. Such highly unsteady situations, with great fluctuations in lake levels, are typical of closed catchment-lake systems in the semi-arid Mediterranean environment. Copyright © 2012 John Wiley & Sons, Ltd.