The dam impounds the 10,230-acre (4,140 ha) Fontana Lake, which spreads across a scenic stretch of the Little Tennessee along the southwestern boundary of the Great Smoky Mountains National Park.

Fontana is located 61 miles (98 km) above the mouth of the Little Tennessee, in a remote area where the westward-flowing river bends briefly to the south.

Several rapid-flowing mountain streams— some of which drop several thousand feet from the crest of the Great Smokies in just a few miles— empty into Fontana's north shore.

At Deals Gap, 11 miles (18 km) west of the dam, the road intersects U.S. Route 129, which continues westward to Maryville.

It was feared that the 2,818,000 yd³ (2,155,000 m³) of concrete required for the dam would create a structure so massive, that heat released during its setting would be trapped for years, and would eventually cause cracks to form.

To aid the release of this heat, engineers divided the dam into construction joints and outfitted them with grout pipes and cooling coils.

A special spillway was thus designed that drains water out through two 34-foot (10.3 m) diameter spill pipes into a diversion tunnel equipped with a deflection system.

Two generating units were placed in operation on January 20, 1945, in time to provide crucial energy for aluminum production in the closing months of World War II.

[9] The construction of Fontana Dam led to the flooding of most of North Carolina Highway 288, which connected Deals Gap and Bryson City.

People in the area had more appreciation for the effect of such construction on the environment and raised challenges; in addition, the NPS had difficulty securing sufficient funding for the road.

Senator Jesse Helms finally secured funding for the road in 2000, and the NPS for the first time conducted a required environmental impact study of the project.

Published in 2007, the EIS concluded that the road's construction would cause "major, adverse, long-term impacts to topography, geology, and soils" in the area.

[12] In 2007, Swain County accepted a $52 million cash settlement from the National Park Service and agreed to drop its demand for a new road along the North Shore.