Submerged macrophytes can have a profound effect on shallow lake ecosystems through their ability to modify the thermal structure and dissolved oxygen levels within the lake. Invasive macrophytes, in particular, can grow rapidly and induce thermal gradients in lakes that may substantially change the ecosystem structure and challenge the survival of aquatic organisms. We performed fine-scale measurements and 3D numerical modeling at high spatiotemporal resolution to assess the effect of the seasonal growth of Potamogeton crispus L. on the spatial and temporal dynamics of temperature and dissolved oxygen in a shallow urban lake (Lake Monger, Perth, WA, Australia). Daytime stratification developed during the growing season and was clearly observed throughout the macrophyte bed. At all times measured, stratification was stronger at the center of the macrophyte bed compared to the bed edges. By fitting a logistic growth curve to changes in plant height over time (r2 = 0.98), and comparing this curve to temperature data at the center of the macrophyte bed, we found that stratification began once the macrophytes occupied at least 50% of the water depth. This conclusion was strongly supported by a 3D hydrodynamic model fitted to weekly temperature profiles measured at four time periods throughout the growing season (r2 > 0.78 at all times). As the macrophyte height increased and stratification developed, dissolved oxygen concentration profiles changed from vertically homogeneous oxic conditions during both the day and night to expression of night-time anoxic conditions close to the sediments. Spatially interpolated maps of dissolved oxygen and 3D numerical modeling results indicated that the plants also reduced horizontal exchange with surrounding unvegetated areas, preventing flushing of low dissolved oxygen water out of the center of the bed. Simultaneously, aerial imagery showed central dieback occurring toward the end of the growing season. Thus, we hypothesized that stratification-induced anoxia can lead to accelerated P. crispus dieback in this region, causing formation of a ring-shaped pattern in spatial macrophyte distribution. Overall, our study demonstrates that submerged macrophytes can alter the thermal characteristics and oxygen levels within shallow lakes and thus create challenging conditions for maximizing their spatial coverage.