Landlocked Bhutan is situated in the eastern Himalayas and is mostly mountainous and heavily forested. It is bordered for 470 kilometers by Tibet (China's Xizang Autonomous Region) to the north and northwest and for 605 kilometers by India's states of Sikkim to the west, West Bengal to the southwest, Assam to the south and southeast, and Arunachal Pradesh (formerly the North-East Frontier Agency) to the east. Sikkim, an eighty-eight-kilometer-wide territory, divides Bhutan from Nepal, while West Bengal separates Bhutan from Bangladesh by only sixty kilometers.

At its longest east-west dimension, Bhutan stretches around 300 kilometers; it measures 170 kilometers at its maximum north-south dimension, forming a total of 46,500 square kilometers, an area one-third the size of Nepal. In the mid-1980s, about 70 percent of Bhutan was covered with forests; 10 percent was covered with year-round snow and glaciers; nearly 6 percent was permanently cultivated or used for human habitation; another 3 percent was used for shifting cultivation (tsheri), a practice banned by the government; and 5 percent was used as meadows and pastures. The rest of the land was either barren rocky areas or scrubland.

Early British visitors to Bhutan reported "dark and steep glens", and the high tops of mountains lost in the clouds, constituting altogether a scene of extraordinary magnificence and sublimity." One of the most rugged mountain terrains in the world, it has elevations ranging from 160 meters to more than 7,000 meters above sea level, in some cases within distances of less than 100 kilometers of each other. Bhutan's highest peak, at 7,554 meters above sea level, is north-central Kulha Gangri, close to the border with China; the second highest peak, Chomo Lhari, overlooking the Chumbi Valley in the west, is 7,314 meters above sea level; nineteen other peaks exceed 7,000 meters.

Bhutan's climate is as varied as its altitudes and, like most of Asia, is affected by monsoons. Western Bhutan is particularly affected by monsoons that bring between 60 and 90 percent of the region's rainfall. The climate is humid and subtropical in the southern plains and foothills, temperate in the inner Himalayan valleys of the southern and central regions, and cold in the north, with year-round snow on the main Himalayan summits.