Officers discovered more than 150 people and a sound system after they were called to Entwistle Reservoir near Darwen on Saturday night (August 22).
The majority of people left the area immediately after being "given words of advice", according to police.
A 56-year-old man was detained by police and later arrested for offences under Section 136 of the Licensing Act 2003 - unauthorised licensable activities.
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He has since been released under investigation pending further enquiries, but officers say their investigation into the rave is continuing.
Temp Det Chief Insp Allen Davies, of Blackburn Police, said: "While clearly it was disappointing to see so many people in the area, against current advice, the vast majority of people left the area without incident. While some young people might feel they will not become ill from coronavirus, the danger is they bring the virus home and infect others.
"We want people to understand the rules and recognise how important it is to follow them. We know it is confusing and understand different parts of the county are under different measures. But the rules are in place to keep people safe and prevent further lockdowns.
"The people organising these events will be pursued and appropriate action taken where necessary."
Under current government guidance designed to prevent the spread of coronavirus, extra restrictions banning gatherings are in place.
The illegal rave came as it was revealed police in England will be able to fine organisers of illegal gatherings of more than 30 people up to £10,000 from Friday, August 28.
Those who attend gatherings like raves, and those who do not wear face coverings where it is mandatory, can be given a £100 fine, doubling on each offence up to a maximum of £3,200.
“I would urge anyone considering attending such an event in future to think twice. As with all the regulations so far, the public will need to support each other and do the right thing. The rules are there to protect people," Temp Det Chief Insp Davies added.