The 34,000-acre Hyalite Drainage, part of the Gallatin National Forest, is a stunning mountain valley that sits between the Gallatin Canyon and Paradise Valley south of Bozeman. This drainage is a popular recreational area with a large reservoir built in the 1940's as it centerpiece. The reservoir has a hold capacity of 8,000 acre feet of water. Its coves and caves, plus easily accessible pier, offer great trout fishing spots. Hyalite Reservoir is used for drinking water for the city of Bozeman and to irrigate the Gallatin Valley. The Hyalite Drainage Recreational Area is surrounded by 10,000-foot mountain peaks, creeks, streams, lakes and numerous waterfalls. The hikes to Blackmore Lake, Palisade Falls, Emerald and Heather Lakes (East Fork of Hyalite Creek Trail), , and the trail to Hyalite Lake all lie in the Hyalite Canyon.

Also found in the Hyalite Drainage of the Gallatin National Forest is the Hyalite Challenge area. This area includes six handicapped-accessible trail systems, a renovated rental cabin and several fishing piers. These facilities are specifically designed to accommodate the needs of people with disabilities, families with small children and senior citizens. During the late 1980s the Gallatin Empire Lions Club and the Gallatin National Forest sponsored a program called the Hyalite Challenge. This program has opened up recreation opportunities in this spectacular area to more people by providing facilities that are accessible to individuals with disabilities, such as Grotto Falls and Palisade Falls.