The town is close to the mouth of the Kingsbridge Estuary, built mostly on the steep west side of the estuary and lies within the South Devon Area of Outstanding Natural Beauty (AONB). The town's extensive waterfront and the naturally sheltered harbour formed by the estuary gave rise to its success as a boat- and ship-building and sailing port. There is also a crabbing industry.

Because of the narrow streets and the priority given to pedestrians, a park and ride scheme operates during the summer from the outskirts of Salcombe.