This study assessed the spawning activity of the threatened Australian lungfish Neoceratodus forsteri by measuring egg densities within the artificial habitat of a large impoundment (Lake Wivenhoe, Australia). Eggs were sampled (August to November 2009) from multiple locations across the impoundment, but occurred at highest densities in water shallower than 40 cm along shorelines with a dense cover of submerged terrestrial vegetation. The numbers of eggs declined over the study period and all samples were dominated by early developmental stages and high proportions of unviable eggs. The quality of the littoral spawning habitats declined over the study as flooded terrestrial grasses decomposed and filamentous algae coverage increased. Water temperatures at the spawning site exhibited extreme variations, ranging over 20·4° C in water shallower than 5 cm. Dissolved oxygen concentrations regularly declined to <1 mg l−1 at 40 and 80 cm water depth. Spawning habitats utilised by N. forsteri within impoundments expose embryos to increased risk of desiccation or excessive submergence through water‐level variations, and extremes in temperature and dissolved oxygen concentration that present numerous challenges for successful spawning and recruitment of N. forsteri in large impoundment environments.