Queenstown is situated on the shore of Lake Wakatipu, the third largest lake by surface area in New Zealand. The town is located close to the lake's northeastern bend, at which point a small arm, the Frankton Arm, joins the lake with its principal outflow, the Kawarau River. The centre of the town is on the north shore at the point where the Frankton Arm links with the main body of the lake, but also extends to the major suburb of Frankton at the eastern end of the arm, and across to Kelvin Heights on the Kelvin Peninsula, which forms the Frankton Arm's southern shore.
The town is at a relatively low altitude for a ski and snowboarding centre, at 310 metres (1,020 ft) above sea level at the lake shore, but is nestled among mountains, most notably the scenic attraction of The Remarkables, to the town's southeast. Below the lake lies the deep Kawarau Gorge, and there are nearby plains suitable for agriculture and viticulture. Queenstown lies close to the heart of the Central Otago wine region.