Originally, a large waterfall flowed over the Cove as a glacier melted above it. The remnant of a stream which once fell over the cliff flows out of the small lake of Malham Tarn, on the moors above the cove. The stream now disappears underground at the aptly-named 'Water Sinks', one and a half kilometres before its valley reaches the top of the cove. A stream of a similar size emerges from a cave at the bottom of the cove. It used to be assumed that the two streams were one and the same. However, experiments with dyes have now shown that two separate streams go underground at different locations, cross paths without mixing behind the cliff, and re-emerge a couple of kilometres apart. This is a testimony to the complexity of the system of caves behind the cliff, which are thought to be around 50,000 years old. Divers have so far explored over 1.6 km of cave passage entered from the base of the Cove.

The lip of the cove has been more heavily eroded than the sides, creating a curved shape. A colossal amount of water used to flow over this waterfall, which measures 80 m high and over 300 m wide. Nowadays the underlying cave systems have a large enough capacity to swallow any flood waters before it reaches the fall. The last record of water flowing over the fall in any kind of volume dates back to the early 19th century after a period of heavy rain. The valley was formed at the end of the last ice age when the ground was frozen. The frozen ground meant that meltwater from the melting ice sheet formed a large river flowing over the surface, eroding the valley that we see today. The water from this river flowed over Malham Cove to form a huge waterfall. When the climate warmed around 12,000 years ago the ground thawed and the river in the valley disappeared underground leaving the valley dry as we see it today.