By damming Walnut Creek in 1903, Mormon settlers created Rainbow Lake. Eventually, the settlement grew into a community called Lakeside, incorporated in 1986 as the Town of Pinetop-Lakeside. Rainbow Lake now lies just outside the boundaries of the Town of Pinetop-Lakeside; but is intimately connected with the area because of Walnut Creek, which runs through three lakes (in downstream order) in the area - Woodland Park Lake (owned by the Town of Pinetop-Lakeside); Rainbow Lake and the privately owned Lake of the Woods. Rainbow Lake is mostly surrounded by homes, including the private HOA Shores at Rainbow Lake on the southeast side.