Panama is located in Central America, bordering both the Caribbean Sea and the Pacific Ocean, between Colombia and Costa Rica. It mostly lies between latitudes 7° and 10°N, and longitudes 77° and 83°W (a small area lies west of 83°).

Its location on the Isthmus of Panama is strategic. By 2000, Panama controlled the Panama Canal which connects the Atlantic Ocean and the Caribbean Sea to the North of the Pacific Ocean. Panama's total area is 74,177.3 km2.

The dominant feature of Panama's geography is the central spine of mountains and hills that forms the continental divide. The divide does not form part of the great mountain chains of North America, and only near the Colombian border are there highlands related to theAndean system of South America. The spine that forms the divide is the highly eroded arch of an uplift from the sea bottom, in which peaks were formed by volcanic intrusions.