It is encompassed completely within the larger Columbia Valley AVA, but Lake Chelan has a higher elevation and more temperate climate than the more southern AVAs also contained within the Columbia Valley.

The 24,040-acre Lake Chelan AVA includes the southern and eastern portions of land surrounding the lake and shares a northern border with the Columbia Valley AVA.

Due to the ice age glaciers that formed Lake Chelan, the soil surrounding it has distinctive properties such as coarse, sandy sediment with notable amounts of quartz and mica, and these result in grapes with discernable textures, minerals, and nutrients.

The Lake Chelan Wine Valley's soil is enriched by volcanic ash from the Glacier Peak eruption around 13,000 years ago. This ancient eruption left a layer of ash, about a couple of feet deep, which has since mixed with the region's soils. This volcanic influence contributes unique mineral content and characteristics to the land, enhancing the terroir and lending distinctive qualities to Lake Chelan wines.

The AVA is also distinguished by a significant “lake effect” that creates mild and favorable temperatures for surrounding areas, resulting in a longer growing season and a reduced risk of frost.

Grapes have been grown in the Chelan Valley since before the turn of the 20th century by a few Native Americans and a group of Italian immigrants. In 1949, the area produced grapes from 154 vineyard acres.