The stream bed of the Vltava near Lipno was chosen because it has a slight incline, facilitating the construction of a reservoir there. The dam is built along the highest-elevated stage of the Vltava River's cascade, thus enabling large amounts of hydropower out-put. This area is mountainous, and borders the Šumava National Park and Nature Reserve. A smaller reservoir near Vyšší Brod is linked to the main reservoir by an artificial underground waterway. This smaller reservoir, named 'Lipno II', serves to level the water of the main reservoir.