The park is surrounded by Pleistocene deposits (young glacial drift of the Bull Lake and Pinedale glaciations) on the southwest, Pennsylvanian/Permian Maroon Formation (maroon and grayish-red sandstones, conglomerates and mudstones) on the east and the Permian/Triassic State Bridge Formation (orange-red to red-brown siltstones and sandstones) on the north.
Sylvan Lake is located at 8,500 feet in the montane and lower subalpine life zones. The major plant communities on the slopes above the lake are aspen and montane coniferous forest. Lodgepole pine and Douglas-fir dominate the montane coniferous forest community on moist slopes, while ponderosa pine and Rocky Mountain juniper occupy drier slopes. In the lodgepole forest scant understory exists. However, the aspen forest is floristically diverse, with aspen, narrowleaf cottonwood, Colorado blue spruce and lodgepole pine in the overstory and serviceberry, snowberry and a variety of wildflowers in the understory.
Adjacent to the reservoir, introduced grasslands are dominated by smooth brome, orchard grass and timothy. This area was planted for hay production in the past. Mesic sagebrush shrubland and mixed mountain shrubland occupy a small amount of the park. Diverse wetland, riparian and aquatic plant communities have become established around the reservoir and in West Brush Creek above and below the dam.
The park is surrounded by the White River National Forest. The generally lush understory vegetation of the aspen forest provides habitat for a variety of mammals, including species of voles and shrews, red fox, marmots, mule deer and elk. Black bear, pine marten, coyote, porcupine, cottontail rabbit and beaver are other common inhabitants.
The majority of bird species that occur in the park are those common to montane riparian shrublands and thick conifer/aspen forests, such as broad-tailed hummingbirds and mountain bluebirds. Bald eagles are frequent winter residents to the park, and ospreys and common loons are occasional migratory visitors. The cold-water fishing opportunities for rainbow and brook and brown trout attract many anglers to Sylvan Lake.