The Lake Drop is a Key Item in Xenoblade Chronicles. It is required to complete Imaginations Tempered, and is also one of the two choices that can be given to Matryona to complete Matryona's Answer. It can be found just north of the Tranquil Grotto on Bionis' Leg, which is in the southeast of Raguel Lake.
Giving Matryona the Lake Drop will produce the Beautiful Portrait.
It is possible to obtain the Lake Drop during Imaginations Tempered, complete Spirits Raised instead, and later use the Lake Drop for Matryona's Answer.