Though officially regarded as a suburb, the isolated nature of Challis means that most locals regard it as a separate settlement within the city limits (as is also the case with many similar settlements on the Otago Peninsula).

Challis is located close to the shore at the foot of steeply sloping hills and cliffsides 4 kilometres (2.5 mi) to the east of Dunedin city centre on the winding Portobello Road, which runs along the northern shore of the peninsula.

Challis is connected by this road to the suburb of Vauxhall 1.8 kilometres (1.1 mi) to the west, and with Macandrew Bay, 2.6 kilometres (1.6 mi) to the northeast.

The larger settlement of The Cove lies immediately to the west, between Challis and Vauxhall.

Challis and The Cove cover 0.72 km2 (0.28 sq mi),[1] and are part of the larger Waverley statistical area.