Limonite often forms as a precipitate at springs and mine openings where acidic, iron-laden waters emerge from the subsurface. Most subsurface waters contain very little oxygen, and when they discharge to the surface, they often encounter oxygenated waters. Dissolved metals in the groundwater rapidly combine with the dissolved oxygen of the surface water to form a precipitate that falls onto the bed of the stream. This precipitate is a characteristic sign of acid mine drainage.

Limonite is very resistant to weathering and often accumulates as a residual deposit. It is often the main form of iron and colorant in lateritic soils.

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