Azure Lake Zone is an ancient ruins and vast wilderness-themed Zone. Taking place at the water's edge of the namesake lake, the background features a grand landscape of forest and rocky mountains that are pristinely reflected on the water's clear surface. All around, the track is overgrown with plant life, and the skies imply that the course is set at the break of dawn. Azure Lake Zone also has purple colored landmasses and light-colored trees. It is very similar to Aquatic Ruin Zone and Marble Garden Zone from Sonic the Hedgehog 2.
Azure Lake Zone in itself is a small Zone which has two shuttle loops at the start. Behind the ramp part there is also a mud pit which functions similarly in Marble Garden Zone. By falling into the deep mud pit without jumping out of it quickly makes the playable character return to the start point. The player has to run over the light-colored tree and end up at the starting point. Items in Competition Mode are seen floating above the mud-pit.
The only obstacle is a white switch which makes a red Spring that blocks and the way between two shuttle loops and launches the player backwards. It disappears for a few seconds after being activated. The switch itself is located on a small hill. If an opponent hits the switch, it may require that the player backtracks a bit in order to proceed.
Azure Lake is also the name for one of the six major fjord-like lakes at Wells Gray Provincial Park located in British Columbia, Canada. It is unclear or coincidence, if the Zone has got the name from it.