Situated in the extreme southwest corner of Portugal (and also continental Europe), the municipality of Vila do Bispo is located within the Barlavento Algarvio, the southwestern Algarvean coast, surrounded on its southern and western frontiers by the Atlantic Ocean. Part of Faro District, the municipality is bordered in the north by Aljezur (linked by the Estrada Nacional EN120 and Estrada Regional ER268), and to the east by Lagos (across the Estrada Nacional EN125).

Due to its geographical location, it is the only municipality in the country with a western and southern coastline. The southern coast, which extends until Cape St. Vincent, includes several bays and sheltered coves, including: the beaches of Praia do Burgau, Cabanas Velhas, Boca do Rio, Praia da Salema, Figueira, Furnas, Zavial, Ingrina, Barranco, Martinhal, Mareta, Tonel and Beliche. Meanwhile, to the west of the St. Vincent coast are the beaches of Telheiro, Ponta Ruiva, Castelejo, Cordoama, Barriga and Murração, that include many carved cliffs and rocky promontories.