The need for a long term supply of clean water was essential for the settlers to Tambo. While the Barcoo River provided some supply, there was a limit to how it could meet the growing needs of town and stock. The Tambo Dam was built in 1880 by government funding, and used horse drawn scoops to create the dam. The dam has not been used for town supply since the first artesian bore was sunk in 1895.
Over the years the dam has been enlarged and provides a wonderful habitat for birds. When full, the community makes use of this asset for skiing, canoeing and tobogganing. Locals and visitors alike enjoy the grassy areas for picnics and make use of the barbecues provided. A rest area is located adjacent to the dam and this picturesque parkland provides a relaxing area for walks. Swimming is also a popular past time.
The dam provides spectacular sunrises reflected in the water and is a bird watchers paradise with black swans and cygnets being found at certain times of the year. The pelicans also make this area home for a few weeks of the year. Brolgas can often be found around the waters edge.