[4] Prior to European settlement, Coupeville and the bay in which it is located, Penn Cove, was inhabited by the Lower Skagit, a Lushootseed-speaking Coast Salish people.

There were three villages around the bay, with the largest being at bəc̓adᶻali, meaning "snake place", the site of present day Coupeville.

[5] There was an abundance of salmon, clams, and other resources, as well as offering easy access to the water, making it an excellent village site.

[6] When Europeans arrived to explore the Puget Sound, it was Joseph Whidbey who first visited the bay, naming it Penn Cove in honor of his good friend.[who?

][7] Captain George Vancouver later wrote after meeting the Skagit at the village that their population had quickly fallen due to disease.

Coupeville is located near the center of Whidbey Island, which lies in Puget Sound between the mainland and the Olympic Peninsula.

On the north side of downtown is Penn Cove, an inlet of the Saratoga Passage.

[11] According to the United States Census Bureau, the town has a total area of 1.23 square miles (3.19 km2), all of it land.

[12] Coupeville experiences significantly lower rainfall than much of western Washington, due to its location within the rain shadow of the Olympic Mountains.

Major employers in Coupeville are Island County and WhidbeyHealth Medical Center.

In addition to 11 restaurants, cafes, and coffee shops, stores include art galleries, gourmet food, clothing, souvenir, and home decor retailers.