Lakes significantly influence Earth’s hydrological processes, biogeochemical cycles, and ecological systems. Despite their importance, incorporating lakes into hydrological models requires careful parameterization to simulate appropriate lake outflow and storage dynamics. Observing the lake dynamics is crucial for calibrating lake parameters effectively. However, acquiring comprehensive in-situ data for the numerous lakes in Canadian shield watersheds is practically unviable. This study explores the feasibility of using satellite observations, particularly Landsat data, as a substitute for sparse in-situ measurements in estimating hydrological model parameters. We employed the Raven Hydrological framework which is highly adaptable for in-catchment, in-channel, and in-lake routing. We used Landsat-based daily lake area data to calibrate the hydrological model of the Petawawa watershed in northeastern Ontario (representing 369 lakes explicitly in the model). The results showed that the model accuracy at the validation sites was comparable across experiments utilizing Landsat Lake area data and those employing in-situ lake-level data for 15 lakes. In addition, using Landsat-based Lake area data performed better than only using river discharge at the most downstream to calibrate the hydrological model. This study underscores the potential of satellite data in improving the accuracy of hydrological models, particularly in the representation of lake dynamics. This finding suggests that upcoming satellite data from SWOT and NISAR could enhance the precision of hydrological model calibration in watersheds that contain numerous lakes.