Narraguinnep Reservoir in southwestern Colorado is one of several water bodies in Colorado with a mercury (Hg) advisory as Hg in fish tissue exceed the 0.3 μg/g guideline to protect human health recommended by the State of Colorado. Concentrations of Hg and methyl-Hg were measured in reservoir bottom sediment and pore water extracted from this sediment. Rates of Hg methylation and methyl-Hg demethylation were also measured in reservoir bottom sediment. The objective of this study was to evaluate potential sources of Hg in the region and evaluate the potential of reservoir sediment to generate methyl-Hg, a human neurotoxin and the dominant form of Hg in fish. Concentrations of Hg (ranged from 1.1 to 5.8 ng/L, n = 15) and methyl-Hg (ranged from 0.05 to 0.14 ng/L, n = 15) in pore water generally were highest at the sediment/water interface, and overall, Hg correlated with methyl-Hg in pore water (R2 = 0.60, p = 0007, n = 15). Net Hg methylation flux in the top 3 cm of reservoir bottom sediment varied from 0.08 to 0.56 ng/m2/day (mean = 0.28 ng/m2/day, n = 5), which corresponded to an overall methyl-Hg production for the entire reservoir of 0.53 g/year. No significant point sources of Hg contamination are known to this reservoir or its supply waters, although several coal-fired power plants in the region emit Hg-bearing particulates. Narraguinnep Reservoir is located about 80 km downwind from two of the largest power plants, which together emit about 950 kg-Hg/year. Magnetic minerals separated from reservoir sediment contained spherical magnetite-bearing particles characteristic of coal-fired electric power plant fly ash. The presence of fly-ash magnetite in post-1970 sediment from Narraguinnep Reservoir indicates that the likely source of Hg to the catchment basin for this reservoir has been from airborne emissions from power plants, most of which began operation in the late-1960s and early 1970s in this region.