Shirley Reservoir was created in 1852 when a consortium of mill owners, acting under the name of the Shirley Reservoir Company, constructed a dam on Catacunemaug Brook. This dam washed out in 1856. It took out the bridge on Catacunemaug Road, the railroad bridge on the mainline of the Fitchburg Railway, the twin bridges at Center Road and Main Street, and the bridge on Shaker Road. It also destroyed a sawmill, some other buildings, and several mill-pond dams.

In April 1987 occurred the 100-year flood. The dam was severely damaged. When the flooding subsided, the lake ran out through a hole under the dam.

Late in the summer of 1987, the state erected a cofferdam in front of the old dam, bringing the lake up to a level that maintained the groundwater level for homeowners and allowed some degree of recreational boating. Efforts are now underway to replace or modify the dam in such ways as to provide better safety and a spillway that will help to maintain more nearly constant water levels.