The Isthmus of Panama is the umbilical cord joining South and Central America. It borders Costa Rica to the west and Colombia to the east. Panama's arched shape reflects both its role as a bridge between continents and as a passageway between oceans. At its narrowest point, it is only 50km (30mi) wide, but it has a 1160km (720mi) Caribbean coastline on its northern shore and a 1690km (1048mi) Pacific coast to the south. The famous canal is 80km (50mi) long and effectively divides the country into eastern and western regions.

There are hundreds of islands near the Panamanian coasts. The two major archipelagos are the San Blas and Bocas del Toro chains in the Caribbean Sea, though the best snorkeling, diving and deep-sea fishing are to be found in the Pacific near Coiba Island and the Pearl Islands. Panama has flat coastal lowlands and two mountain chains running along its spine. The highest peak is Volcán Barú at 3475m (11,400ft).

Rainforests dominate the canal zone, the northwestern portion of the country and much of the eastern half. Although Costa Rica is widely known for its fantastic wildlife, Panama has, in fact, a greater number of flora and fauna species, more land set aside for preservation and far fewer people wandering through the jungle looking for wildlife and inadvertently scaring it away. There's much truth in the Panamanian saying that in Costa Rica 20 tourists try to see one resplendent quetzal, but in Panama one person tries to see 20 of these exquisite birds.

Panama has two seasons. The dry season lasts from January to mid-April and the rainy season from mid-April to December. Rainfall is heavier on the Caribbean side of the highlands, though most people live on or near the Pacific coast. Temperatures are typically hot in the lowlands (between 21°C and 32°C/70°F and 90°F) and cool in the mountains (between 10 and 18°C/50 and 64°F). These vary little throughout the year.