Outside its bay, the warm and cold ocean currents meet, which allow a commercial fishing industry to flourish.

The village of Ōfunato was created within Kessen District, Iwate on 1 April 1889 with the establishment of the modern municipalities system.

[10] Ofunato's theatre - which had remarkably sustained no damage - was one of the few buildings still standing, and gave shelter to about 250 survivors.

Ōfunato has a mayor-council form of government with a directly elected mayor and a unicameral city legislature of 25 members.

In terms of national politics, the city is part of Iwate 2nd district of the lower house of the Diet of Japan.

The local economy is largely based on commercial fishing, with cement production and wood processing as secondary industries.