Petrohué sits at the western end of Lago Todos los Santos within Vicente Pérez Rosales National Park, roughly 96 km northeast of Puerto Montt in the Los Lagos Region. It serves as the primary access point to the lake, which stretches 178.

5 km² across a landscape shaped by glacial and volcanic forces and bordered by old-growth Valdivian temperate rain forests.

The locality lies along the international crossing between Puerto Montt and Bariloche, Argentina, making it a natural staging point for travelers on that route.

Nearby, the Río Petrohué — which originates at the lake — flows through a series of chute-type waterfalls a short distance downstream, also within the national park.