Inlay Lake is the second largest natural lake in Myanmar. Located in Shan State, in the eastern part of the country, it is a known biodiversity hotspot. The lake is negatively affected by an increasing local human population and rapid growth in both agriculture and tourism. In recent decades, several studies have listed faunistic and floristic groups in Inlay Lake, but there is still a general lack of knowledge about the aquatic macrophyte and phytoplankton community composition and abundance, and their interactions. To fill this knowledge gap, field surveys of biological and physical and chemical parameters were carried out in the period 2014–2017. They show that Inlay Lake is a shallow, clear water and calcareous lake, with nutrient concentrations indicating mesotrophic-eutrophic conditions. However, close to the shore, nutrient concentrations are generally higher, reflecting pollution from inflowing rivers, shoreline villages and floating gardens. Both the richness and abundance of aquatic macrophytes in Inlay Lake were high, with several species forming extensive stands in most of the lake over the whole survey period. Total phytoplankton and cyanobacterial biomass were low, but cyanobacteria included toxin-producing strains of Microcystis, suggesting that cyanobacterial and total phytoplankton biomass need to be kept low to avoid potentially harmful cyanobacterial blooms. Submerged macrophyte abundance and phytoplankton biomass were inversely correlated in the heavily vegetated northern lake area. Our survey suggests a great importance of the submerged macrophytes to the general water quality and the clear water state in Inlay Lake. Maintaining high macrophyte abundances should therefore be a goal in management strategies, both for Inlay Lake and other lakes in Myanmar. It is highly desirable to include macrophytes and phytoplankton in the lake monitoring in Myanmar.