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Laochi Lake lies in a deep valley formed by the mountain ranges of Ezofuji surrounding the lake. There is a path leading from Wep'keer to the lake, but since Wep'keer has a lower elevation than the lake, Laochi Lake is like a plateau in the bottom of a valley. On the shore of the lake is a pedestal where Kutone is enshrined, but during most of Ōkami's events, the sword is held by Oki and will only be returned near the end. On the shore of the lake is a sloped path that lead onto the cliff and to the gates of Wawku Shrine and Tuskle's hut.
There are rumors that demons still rise from Laochi Lake's depths, most likely from the Ark of Yamato, thus giving it the name "The Lake of Demons." Because of the lake's close association with the Ark of Yamato, it is seen as the root of evil in the world. Yet, despite its infamous past, it is still considered a holy place for the Oina of Wep'keer due to the legends of all life in Nippon having originated from the north.
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Two hundred years prior to the events of Ōkami, Orochi and its legion of countless demons had suddenly came and attack the Celestial Plain. In order to ensure future existence, the Celestials, evacuated by Waka, boarded the Ark of Yamato hoping to get away from the chaos that the plain had became. However, not long after setting sails, the Celestials were attacked by another endless legion of demons, and they were all slain. The ark lost its rudder, and plummeted down to Laochi Lake. The demons then disembark and went on to wreck havoc in Nippon.Kemu's permission to access Kamui (Ezofuji), Amaterasu reaches Laochi Lake, and climbs the slope to Tuskle hut to gain information about accessing Yoshpet. Later, after Lika had been rescued from beyond the Spirit Gate, she is brought back to Laochi Lake, which Tuskle leads her to the altar to perform the Volcanic Incantation. Later on, after Lechku and Nechku had been vanquished at the hands of Oki and Amaterasu, the sword Kutone is returned to its pedestal. Just as Kutone is returned, a brilliant light shot forth from it, melting the perpetual ice of Laochi Lake and releasing the Ark of Yamato.
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- Tribe of the Moon: On the bank of the lake, next to the altar of Kutone.
- #84: On an alcove of rocks to the right of the cliffs surrounding Laochi Lake.
- #85: Atop a series of ledges on the cliffs on the far side of the lake. Reached via Vine.
- #86: In the rock spot on the same series of ledges, dug up with Digging Champ.
- #87: In the rocky area reached via Mist Warp.
- Laochi or rayochi (「ラヨチ」?) means "rainbow" in the Ainu language. Rainbows are seen as inauspicious symbols by the Ainu people.