Yangshuo locates in the northeast of Guangxi Zhuang Autonomous Region and to the southeast of Guilin City, China. Surrounded by karst peaks and bordered on one side by the Li River. It is easily accessible by bus or by boat from nearby Guilin. There are diverse ethnic minority groups inhabited here, including Hui, Zhuang, Yao and others. Over the years, it has become popular with foreign backpackers.

Yangshuo is situated on a small plain between a number of karst peaks. Two main roads run away from the water and form the central part of the town, Chinese Street (Dei Chui Lu) and West Street (西街, xi jie). Most foreign-oriented businesses, such as hostels, hotels, rock climbing companies, restaurants and entertainment venues, are situated on West Street or the pedestrian only Xian Qian Street which runs between Chinese and West Street.

Visitors to Yangshuo can swim in the Li River or the cleaner Yu Long (Dragon River), climb one of the many nearby karst peaks or hire a bicycle for a cycling trip through the karst scenery. Additionally, there is a butterfly cave near the town and a number of cave systems. Yangshuo is also China's foremost venue for rock climbing, with around 300 bolted routes and several companies offering guiding and equipment hire. With mountain biking and kayaking becoming more popular, Yangshuo is becoming an adventure sports centre as well as a stop on the traveller's trail. Most of the original culture of the town has been absorbed into the tourist industry.