The town is located on the Ill River, a direct tributary of the Rhine. It is surrounded by the ranges of the Bregenz Forest Mountains in the north, and by the Rätikon and Silvretta ranges in the south. Bludenz lies at the meeting point of five valleys: Walgau and Montafon (Ill), Brandnertal, Klostertal up to Arlberg Pass, and Großes Walsertal.
Bludenz is a popular hiking and mountain-biking resort in the summer months, located on the way to many nearby skiing resorts (e.g., Brand and Lech). Due to the A14 Rheintal/Walgau Autobahn with its southeastern terminus in Bludenz, the name of the town is well known in Austria.
Archaeological finds indicate settlement in the area of Bludenz began in the Bronze Age, lasting up to the La Tène era. The name Bludenz originates from the Celts. In 600 BC there was a military training ground of the Romans.