The lake contains borax islands, whose white color contrasts with the reddish color of its waters, which is caused by red sediments and pigmentation of some algae.
Laguna Colorada is part of the Los Lípez (formerly Laguna Colorada) Ramsar wetland. It was listed as a "Ramsar Wetland of International Importance" in 1990. On, July 13, 2009 the site was expanded from 513.18 to 14,277.17 km2 (5,512.45 sq mi) to include the surrounding high Andean endorheic, hypersaline and brackish lakes and associated wetlands (known as bofedales).
James's Flamingos abound in the area. Also it is possible to find Andean and Chilean flamingos, but in a minor quantity.