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Henley-in-Arden is approximately 9 miles west of the county town of Warwick, 15 miles southeast of Birmingham, 9 miles east of Redditch and 9 miles north of Stratford upon Avon (where the road between Stratford and Henley was named Henley Street1).

It is located in a valley of the River Alne (white, frothy), which separates Henley from the adjacent settlement of Beaudesert. Henley and Beaudesert effectively form a single entity, and share a joint parish council, although Beaudesert is a separate civil parish.

The town lies at a crossroads between the A3400 and the A4189 roads and is the starting point for the circular Arden Way path. It also lies on the Heart of England Way. Henley Sidings is a nature reserve managed by the Warwickshire Wildlife Trust.

In the 2001 census the population of the civil parish of Henley-in-Arden was 2,011. Whilst the population of its urban area which includes Beaudesert was 2,797.

Henley-in-Arden is not listed in the Domesday Book and may not have existed until the 12th century. The first record of the town is in a legal instrument drawn during the reign of Henry II. It was originally a hamlet of Wootton Wawen, on Feldon Street, the original route out of the Forest of Arden.

In the 11th century, a Thurstan de Montfort constructed Beaudesert Castle, a motte and bailey castle, on the hill above Beaudesert. In 1140, the Empress Matilda granted the right to hold a market at the castle and Henley soon became a prosperous market town, conveniently located on the busy Birmingham-to-Stratford road. In 1220 in the reign of Henry III, the lord of the manor, Peter de Montfort, procured the grant of a weekly Monday market and an annual fair to last two days, for the town.

Historically, Henley has had several private lunatic asylums. The first was licensed in 1744, which housed pauper lunatics at the expense of the parish. Another was run by Thomas Burman in 1795, who charged "one guinea/week for board and medicines, the patient finding their own linen and washing. If any person chuses a servant constantly to attend on them, board and wages are separately considered.".