The old town is one of the most popular tourist destinations in Yunnan, known for its natural scenery, historical and cultural heritage, and vibrant nightlife.

[3] Dali City is located in western Yunnan, approximately 250 km (160 mi) northwest of the provincial capital of Kunming.

The county-level city surrounds Erhai Lake between the Cang Mountains to the west and Mount Jizu to the east.

The area became significantly Muslim (Hui) under the Yuan and Ming and was the center of the Panthay Rebellion against the Qing from 1856 to 1863.

[9] Rail and then air transport have permitted the area (particularly Dali Old Town) to become accessible to tourists in the 20th century.

Building codes mandate that new construction in the old town and surrounding countryside must conform to the traditional Chinese style, with tiled roofs and bricks, plaster, or white-washed walls.

Historically, Dali was able to control some of the trade between India and China and independently famed for the woodworkers of the town of Xizhou and for its high-quality marble, used both for construction and decorative objects.

It was so prominent in the latter that the modern Chinese word for marble is literally "Dali stone" (大理石; dàlǐshí).

Dali (i.e., Xiaguan) is connected to Kunming and points east by the Hangrui Expressway (G56), which also runs west to Ruili on the Burmese border.

The standard gauge line from Kunming, China to Kyaukphyu port opened in 2021, with a station at Dali.