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..727cb36f5f 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) {
@@ -35,14 +33,13 @@ 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
 	})
 }
@@ -62,7 +59,21 @@ func (l *Flags) Connection() (*client.Connection, error) {
 	return conn, nil
 }
 
+func portInUse(port string) bool {
+	ln, err := net.Listen("tcp", port)
+	if err != nil {
+		return true
+	}
+	ln.Close()
+	return false
+}
+
 func (l *Flags) Open(ctx context.Context) (api.Interface, error) {
+	// 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 l.Lake == defaultDataDir && portInUse("9867") {
+		l.Lake = "http://localhost:9867"
+	}
 	uri, err := l.URI()
 	if err != nil {
 		return nil, err
diff --git a/cmd/zed/serve/command.go b/cmd/zed/serve/command.go
index 4caf08458c..e31bd2c7a3 100644
--- a/cmd/zed/serve/command.go
+++ b/cmd/zed/serve/command.go
@@ -73,9 +73,6 @@ 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 {
 		return err
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/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