you have probably missed the key in the middle room: The room where the water can be raised to the middle level. Enter the room when all the water is drained and notice the Brown block you are standing on… Now, use the hookshot to reach the panel where you play Zelda’s Lullaby and raise the water level. Notice how the brown block has risen with the water? Use the iron boots and go back down to the door you entered from, notice the hole? Go in there and defeat all the enemies, which leads you to the key. (taken from GAMEFAQS)