Candle Lake lies east of Prince Albert National Park and is drained by the Torch River into the Saskatchewan River. The name Candle Lake is derived from the Cree Indian belief that a strange light can be seen on the lake surface. It is assumed that an Indian campsite used to be located at the site of the former Hudson Bay Trading Post, now called Fisher Creek. This was the original Indian burial ground and some graves may still be found. This light is nearly always seen in the direction of several Indian graves on the north shore of the lake.

On the east side of the lake are two islands named "Curly Islands" and on evenings a great light shines between them. It seems to cast a shadow on the water resembling a candle glow. Although the Indians sometimes hunt in the area, they will not settle by the lake as they consider this to bear an evil spirit, therefore haunted. A more scientific view is that the glow on the water originated from phosphorescent decaying wood floating on the water. Nevertheless, the Indians quietly left the area leaving only the legend and the name "Candle Lake".

The Mosher Torch Trail dates back to the days when sleigh loads of whitefish were hauled to the Outposts at Batoche and Duck Lake. Many of the street in Candle Lake are named after early pioneers.