The Prospect Road passes through this small community located near McGrath's Lake. It was part of the 1,550 acres issued to several families in 1787 in connection with Brookside. Once, it was the location of a community of farming immigrants.

The area may have been named for a pioneer who lost his hatchet (a short handled axe) or it may be because the lake is said to somewhat resemble the shape of a hatchet .

The population of Hatchet Lake increased significantly following World War II.

In the late 20th century Hatchet Lake became a bedroom community of Halifax. The modern highway and availability of land attracted newcomers to move into the area. They built or bought homes from which they could easily commute to Halifax for employment. Few relations of early settlers are still in residence.