Chironomid, pollen, and rhizopod records from a permafrost sequence at Bol'shoy Lyakhovsky Island (New Siberian Archipelago) document the development of a thermokarst palaeo-lake and environmental conditions in the region during the last Interglacial (MIS 5e). Open Poaceae and Artemisia associations dominated vegetation at the beginning of the interglacial period. Rare shrub thickets (Salix, Betula nana, Alnus fruticosa) grew in more protected and wetter places as well. Saalian ice wedges started to melt during this time, resulting in the formation of an initial thermokarst water body. The high percentage of semi-aquatic chironomids suggests that a peatland-pool initially existed at the site. A distinct decrease in semi-aquatic chironomid taxa and an increase in lacustrine ones point to a gradual pooling of water in the basin, which could in turn induce thermokarst and create a permanent pond during the subsequent period. The highest relative abundance of Chironomus and Procladius reflects unfrozen water remaining under the ice throughout the ice-covered period during the later stage of palaeo-lake development. The chironomid record points to three successive stages during the history of the lake: (1) a peatland pool; (2) a pond (i.e., shallower than the maximum ice-cover thickness); and (3) a shallow lake (i.e., deeper than the maximum ice-cover thickness). The trend of palaeo-lake development indicates that intensive thermokarst processes occurred in the region during the last Interglacial. Shrub tundra communities with Alnus fruticosa and Betula nana dominated the vegetation during the interglacial optimum. The climate was moister and warmer than present. The results of this study suggest that quantitative chironomid-based temperature reconstructions from Arctic thermokarst ponds/lakes may be problematic due to other key environmental factors, such as prolonged periods of winter anoxia and local hydrological/geomorphological processes, controlling the chironomid assemblages. © Springer 2006.