In a setting of great natural beauty Dunedin is situated at the head of Otago Harbour, a narrow inlet extending south-westward for some 15 miles. Geologically, the harbour is a recent creation formed by the flooding of two river valleys. The entrance to the harbour is flanked on the west by Hayward Point and on the east by the massive Taiaroa Head. From the time of its foundation in 1848, the city has spread slowly over the low-lying flats and nearby hills and across the isthmus to the slopes of the Otago Peninsula. Dunedin, like Christchurch, is on the Picton-Bluff State Highway and on the South Island Main Trunk Railway. The Central Otago line, a branch of the Main Trunk Railway, runs inland as far as Cromwell. The city is also a junction for roads into Central Otago.
The business and industrial portion of the city is concentrated on flat land, most of which has been reclaimed over the years from the harbour. Beyond this are the suburbs, which extend from east-south to north-east, like a crescent, from the heights of Waverley and Andersons Bay, to St. Clair beach on the south, along the hills of Mornington, Roslyn, and Maori Hill, and on to the rising slopes of Ravensbourne. Beyond these again is a sweep of higher hills running from south to north-east, the major heights being Saddle Hill (1,151 ft), Flagstaff (2,186 ft), and Mount Cargill (2,216 ft). From the higher suburbs and surrounding hills there is a wonderful range of panoramic views.
Three valleys descend from the perimeter. On the westward is the Kaikorai Valley with the stream of that name flowing south-westward; from the northward the Water of Leith flows southward and south eastward down another valley between the slopes of Flagstaff and Mount Cargill to the upper harbour; the third, the tributary North-East Valley, descends south-westward to join the Leith Valley in the northern part of the city. Westward of Dunedin the hilly country descends to the alluvial Taieri Plain and the lower basin of the Taieri River.