diff --git a/cli/lakeflags/datadir.go b/cli/lakeflags/datadir.go
new file mode 100644
index 0000000000..d88020276d
--- /dev/null
+++ b/cli/lakeflags/datadir.go
@@ -0,0 +1,36 @@
+package lakeflags
+
+import (
+	"os"
+	"path/filepath"
+	"runtime"
+)
+
+var defaultDataDir string
+
+func init() {
+	defaultDataDir = getDefaultDataDir()
+}
+
+// getDefaultDataDir returns the default data directory for the current user.
+// Derived from https://github.com/btcsuite/btcd/blob/master/btcutil/appdata.go
+func getDefaultDataDir() string {
+	// Resolve the XDG data home directory if set.
+	if xdgDataHome := os.Getenv("XDG_DATA_HOME"); xdgDataHome != "" {
+		return filepath.Join(xdgDataHome, "zed")
+	}
+	if runtime.GOOS == "windows" {
+		if appData := os.Getenv("LOCALAPPDATA"); appData != "" {
+			return filepath.Join(appData, "zed")
+		}
+	}
+	if homeDir, _ := os.UserHomeDir(); homeDir != "" {
+		// Follow the XDG spec which states:
+		// If $XDG_DATA_HOME is either not set or empty, a default equal to
+		// $HOME/.local/share should be used.
+		return filepath.Join(homeDir, ".local", "share", "zed")
+	}
+	// Return an empty string which will cause an error if a default data
+	// directory cannot be found.
+	return ""
+}
diff --git a/cli/lakeflags/flags.go b/cli/lakeflags/flags.go
index b4678fba3c..bb6efb3c56 100644
--- a/cli/lakeflags/flags.go
+++ b/cli/lakeflags/flags.go
@@ -5,6 +5,7 @@ import (
 	"errors"
 	"flag"
 	"fmt"
+	"net"
 	"os"
 	"path/filepath"
 	"strings"
@@ -21,11 +22,8 @@ var ErrNoHEAD = errors.New("HEAD not specified: indicate with -use or run the \"
 
 type Flags struct {
 	ConfigDir string
-	// LakeSpecified is set to true if the lake is explicitly set via either
-	// command line flag or environment variable.
-	LakeSpecified bool
-	Lake          string
-	Quiet         bool
+	Lake      string
+	Quiet     bool
 }
 
 func (l *Flags) SetFlags(fs *flag.FlagSet) {
@@ -35,20 +33,19 @@ func (l *Flags) SetFlags(fs *flag.FlagSet) {
 		dir = filepath.Join(dir, ".zed")
 	}
 	fs.StringVar(&l.ConfigDir, "configdir", dir, "configuration and credentials directory")
-	l.Lake = "http://localhost:9867"
 	if s, ok := os.LookupEnv("ZED_LAKE"); ok {
 		l.Lake = strings.TrimRight(s, "/")
-		l.LakeSpecified = true
+	} else {
+		l.Lake = defaultDataDir
 	}
 	fs.Func("lake", fmt.Sprintf("lake location (env ZED_LAKE) (default %s)", l.Lake), func(s string) error {
 		l.Lake = strings.TrimRight(s, "/")
-		l.LakeSpecified = true
 		return nil
 	})
 }
 
 func (l *Flags) Connection() (*client.Connection, error) {
-	uri, err := l.URI()
+	uri, err := l.ClientURI()
 	if err != nil {
 		return nil, err
 	}
@@ -63,7 +60,7 @@ func (l *Flags) Connection() (*client.Connection, error) {
 }
 
 func (l *Flags) Open(ctx context.Context) (api.Interface, error) {
-	uri, err := l.URI()
+	uri, err := l.ClientURI()
 	if err != nil {
 		return nil, err
 	}
@@ -95,3 +92,27 @@ func (l *Flags) URI() (*storage.URI, error) {
 	}
 	return u, err
 }
+
+// ClientURI returns the URI of the lake to connect to. If the lake path is
+// the defaultDataDir, it first checks if a service is running on port 9867
+// and if so, uses http://localhost:9867 as the lake location.
+func (l *Flags) ClientURI() (*storage.URI, error) {
+	u, err := l.URI()
+	if err != nil {
+		return nil, err
+	}
+	// If the lake is the defaultDataDir, first check if a service is running
+	// on port 9867 and if so, use this as the lake location.
+	if u.String() == storage.MustParseURI(defaultDataDir).String() && portInUse("9867") {
+		u = storage.MustParseURI("http://localhost:9867")
+	}
+	return u, nil
+}
+
+func portInUse(port string) bool {
+	ln, err := net.Listen("tcp", ":"+port)
+	if err == nil {
+		ln.Close()
+	}
+	return err != nil
+}
diff --git a/cmd/zed/serve/command.go b/cmd/zed/serve/command.go
index 4caf08458c..d6e42c8174 100644
--- a/cmd/zed/serve/command.go
+++ b/cmd/zed/serve/command.go
@@ -73,17 +73,12 @@ func (c *Command) Run(args []string) error {
 		return err
 	}
 	defer cleanup()
-	if !c.LakeFlags.LakeSpecified {
-		c.LakeFlags.Lake = ""
-	}
-	uri, err := c.LakeFlags.URI()
-	if err != nil {
+	if c.conf.Root, err = c.LakeFlags.URI(); err != nil {
 		return err
 	}
-	if api.IsLakeService(uri.String()) {
+	if api.IsLakeService(c.conf.Root.String()) {
 		return errors.New("serve command available for local lakes only")
 	}
-	c.conf.Root = uri
 	if c.rootContentFile != "" {
 		f, err := fs.Open(c.rootContentFile)
 		if err != nil {
diff --git a/cmd/zed/use/command.go b/cmd/zed/use/command.go
index 527123c247..6923aeecb7 100644
--- a/cmd/zed/use/command.go
+++ b/cmd/zed/use/command.go
@@ -84,7 +84,7 @@ func (c *Command) Run(args []string) error {
 			return errors.New("default pool and branch unset")
 		}
 		fmt.Printf("HEAD at %s\n", head)
-		if u, err := c.LakeFlags.URI(); err == nil {
+		if u, err := c.LakeFlags.ClientURI(); err == nil {
 			fmt.Printf("Lake at %s\n", u)
 		}
 		return nil
diff --git a/cmd/zed/ztests/no-lake-location.yaml b/cmd/zed/ztests/no-lake-location.yaml
index cedc088f87..0fade08661 100644
--- a/cmd/zed/ztests/no-lake-location.yaml
+++ b/cmd/zed/ztests/no-lake-location.yaml
@@ -1,6 +1,6 @@
 script: |
   ! zed ls -lake ''
-  ! zed serve
+  ! zed serve -lake ''
 
 outputs:
   - name: stderr
diff --git a/cmd/zed/ztests/xdg-data-home.yaml b/cmd/zed/ztests/xdg-data-home.yaml
new file mode 100644
index 0000000000..0077704ed5
--- /dev/null
+++ b/cmd/zed/ztests/xdg-data-home.yaml
@@ -0,0 +1,8 @@
+script: |
+  export XDG_DATA_HOME=path/to/lake
+  zed init
+
+outputs:
+  - name: stdout
+    data: |
+      lake created: path/to/lake/zed
diff --git a/compiler/ztests/from-error.yaml b/compiler/ztests/from-error.yaml
index 209544a444..c40e85b392 100644
--- a/compiler/ztests/from-error.yaml
+++ b/compiler/ztests/from-error.yaml
@@ -1,5 +1,5 @@
 script: |
-  ! zc -C -s 'from p'
+  ! zc -lake='' -C -s 'from p'
   echo === >&2
   export ZED_LAKE=test
   zed init