diff --git a/cli/lakeflags/datadir.go b/cli/lakeflags/datadir.go
new file mode 100644
index 0000000000..1f3755e398
--- /dev/null
+++ b/cli/lakeflags/datadir.go
@@ -0,0 +1,30 @@
+package lakeflags
+
+import (
+	"os"
+	"path/filepath"
+	"runtime"
+)
+
+// 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..c1852170a0 100644
--- a/cli/lakeflags/flags.go
+++ b/cli/lakeflags/flags.go
@@ -21,11 +21,10 @@ 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
+
+	lakeSpecified bool
 }
 
 func (l *Flags) SetFlags(fs *flag.FlagSet) {
@@ -35,20 +34,17 @@ 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
+		l.Lake, l.lakeSpecified = s, true
 	}
 	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
+		l.Lake, l.lakeSpecified = s, 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 +59,7 @@ 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
 	}
@@ -86,12 +82,35 @@ func (l *Flags) AuthStore() *auth0.Store {
 }
 
 func (l *Flags) URI() (*storage.URI, error) {
-	if l.Lake == "" {
+	lk := strings.TrimRight(l.Lake, "/")
+	if !l.lakeSpecified {
+		lk = getDefaultDataDir()
+	}
+	if lk == "" {
 		return nil, errors.New("lake location must be set (either with the -lake flag or ZED_LAKE environment variable)")
 	}
-	u, err := storage.ParseURI(l.Lake)
+	u, err := storage.ParseURI(lk)
 	if err != nil {
 		err = fmt.Errorf("error parsing lake location: %w", err)
 	}
 	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 zed service is running on
+// localhost: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 !l.lakeSpecified && localServer() {
+		u = storage.MustParseURI("http://localhost:9867")
+	}
+	return u, nil
+}
+
+func localServer() bool {
+	_, err := client.NewConnection().Ping(context.Background())
+	return err == nil
+}
diff --git a/cmd/zed/init/command.go b/cmd/zed/init/command.go
index 32e9870b50..16a4462574 100644
--- a/cmd/zed/init/command.go
+++ b/cmd/zed/init/command.go
@@ -8,6 +8,7 @@ import (
 	"github.com/brimdata/zed/cmd/zed/root"
 	"github.com/brimdata/zed/lake/api"
 	"github.com/brimdata/zed/pkg/charm"
+	"github.com/brimdata/zed/pkg/storage"
 	"go.uber.org/zap"
 )
 
@@ -35,23 +36,28 @@ func (c *Command) Run(args []string) error {
 		return err
 	}
 	defer cleanup()
-	var path string
+	var u *storage.URI
 	if len(args) == 0 {
-		path = c.LakeFlags.Lake
+		if u, err = c.LakeFlags.URI(); err != nil {
+			return err
+		}
 	} else if len(args) == 1 {
-		path = args[0]
+		path := args[0]
+		if path == "" {
+			return errors.New("single lake path argument required")
+		}
+		if u, err = storage.ParseURI(path); err != nil {
+			return err
+		}
 	}
-	if path == "" {
-		return errors.New("single lake path argument required")
-	}
-	if api.IsLakeService(path) {
+	if api.IsLakeService(u.String()) {
 		return fmt.Errorf("init command not valid on remote lake")
 	}
-	if _, err := api.CreateLocalLake(ctx, zap.Must(zap.NewProduction()), path); err != nil {
+	if _, err := api.CreateLocalLake(ctx, zap.Must(zap.NewProduction()), u.String()); err != nil {
 		return err
 	}
 	if !c.LakeFlags.Quiet {
-		fmt.Printf("lake created: %s\n", path)
+		fmt.Printf("lake created: %s\n", u)
 	}
 	return 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..ad080d453c
--- /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
+    regexp: |
+      lake created: file:.*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