Madison and Norman both visit the Blue Lagoon to find Paco and collect information from him - Madison about who rented the apartment at which Ethan Mars completed the Lizard Trial, and Norman about what happened to the 1983 Chevrolet Malibu after Paco picked it up from Jackson Neville. Madison must make herself look seductive and then dance to get the bouncer to invite her to the VIP lounge. She has a brief conversation with Paco before following him to his office, where he pulls a gun on her and forces her to do a striptease for him. After knocking him out and duct-taping him to a chair, she interrogates him until he tells her that he rented the apartment to John Sheppard. As Madison leaves the Blue Lagoon, she walks past Norman, who goes to Paco's office to find him dead of a gunshot wound and gets ambushed by a katana-wielding Origami Killer. If he survives the attack, he can discover several vital clues about the Origami Killer in the office using ARI.
- Concept art found in the "Bonus" section of the Extras menu of the game reveals that the nightclub was once called the "Black Lagoon," possibly a reference to the film Creature from the Black Lagoon.
- Ethan is the only main character who never visits the Blue Lagoon.
- If Madison gets killed before this, it will show the entrance for Norman Jayden instead, but Paco still dies regardless.
- If both Madison and Jayden die before their respective Blue Lagoon chapters, the club will not appear at all and no further mention of or reference to it will be made.
- When walking up to Paco's office as Jayden, if the player quickly makes it up to Paco before he is shot, Paco won't have a bullet hole in him.
- The name might be a reference to the Blue Oyster Bar from Police Academy.
- There is a playlist on YouTube of all of the music that can be heard in the Blue Lagoon.