Final answer:
Lake Peipus forms the border between Estonia and Russia. It is a significant transboundary lake in Europe, not to be confused with Lake Baikal or the Caspian Sea, which are located within Russia.
Step-by-step explanation:
The lake that forms the border between Estonia and Russia is Lake Peipus (Peipsi in Estonian). This lake is located on the eastern edge of Estonia, adjacent to Russia, and serves as one of the natural borders between the two countries. It is the largest transboundary lake in Europe which has historically served as a point of trade, as well as conflict, such as during the Northern Crusades.
The Baltic states, including Estonia, have transitioned to market economies with democratic governments after receiving their independence from the Soviet Union in 1991. Neither Lake Baikal, located in Siberia, nor the Caspian Sea, the largest enclosed inland body of water on Earth, are near Estonia or serve as a border with Russia in this context. Instead, these significant water bodies are located further within the territory of Russia.