Lies about area surrounded by water (4)
I believe the answer is:
isle
'surrounded by water' is the definition.
(an isle is surrounded by water)
'lies about' is the wordplay.
'about' is an anagram indicator.
'lies' anagrammed gives 'ISLE'.
'area' acts as a link.
I am not very happy about this link. It may belong to another bit of the clue.
Can you help me to learn more?
(Other definitions for isle that I've seen before include "-- of Dogs, area of London" , "it's offshore" , "inch, perhaps" , "Anglesey, say" , "Skye or Capri?" .)