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Lake Issyk-Kul is an important endorheic lake in arid Central Asia. Climate change, anthropogenic water consumption and a complex basin hydrology with interlocked driving forces have led to a high variability of the water balance and an overall trend of decreasing lake water levels. The main objective of this study was to investigate these main driving forces and their interactions with the lake’s water level. Hydro-meteorological and socioeconomic data from 1980 to 2012 were used for a dynamic simulation model, based on the system dynamics (SD) method. After the model calibration and validation with historical data, the model provides accurate simulation results of the water level of Lake Issyk-Kul. The main factors impacting the lake’s water level were evaluated via sensitivity analysis and water resource scenarios. Results based on the sensitivity analysis indicated that socio-hydrologic factors had different influences on the lake water level change, with the main influence coming from the water inflow dynamic, namely, the increasing and decreasing water withdrawal from lake tributaries. Land use changes, population increase, and water demand decrease were also important factors for the lake water level variations. Results of four scenario analyses demonstrated that changes in the water cycle components as evaporation and precipitation and the variability of river runoff into the lake are essential parameters for the dynamic of the lake water level. In the future, this SD model can help to better manage basins with water availability uncertainties and can guide policymakers to take necessary measures to restore lake basin ecosystems.