[2] The municipality is the westernmost in Slovenia, situated in the Julian Alps in the Upper Soča (Isonzo) Valley, at the confluence with the Nadiža (Natisone) River, close to the border with Italy.

The nearby Tonocov Grad archaeological site has remains of 5th-century Roman buildings,[3] when the area was located in the forefront of the Claustra Alpium Iuliarum defense system.

The settlement was an important base on the Roman road from Forum Iulii (present-day Cividale del Friuli) up to the Predil Pass and the Noricum province.

From 1754 Kobarid belonged to the newly established Princely County of Gorizia and Gradisca, a Habsburg crown land which later formed the Austrian Littoral together with the March of Istria and the Imperial Free City of Trieste.

At the outset of World War I, the area saw one of the first victims of the conflict, Countess Lucy Christalnigg, killed by Landsturmer guards while she was on a mission for the Red Cross.

After the end of the war in 1918, Kobarid was occupied by the Italian Army, and upon the 1919 Treaty of Saint-Germain-en-Laye it was officially annexed to Italy and incorporated into the Julian March region.

Between 1922 and 1943, Kobarid was submitted to a policy of violent Fascist Italianization and many locals emigrated to the neighbouring Kingdom of Yugoslavia.

The town became one of the crucial centres of recruitment and activity of the militant anti-fascist organization TIGR, which carried out an underground fight against the Italian Fascist regime.

The Morgan Line, which divided the Allied military occupation zone from the Yugoslav one, ran just east of the town, along the Soča River.