The city of Irvine lies to the northeast, Lake Forest and Aliso Viejo to the east, the undeveloped San Joaquin Hills to the west, and Laguna Beach to the south.

It is briefly culverted where it crosses under Laguna Canyon Road, but most of the upper course flows in a natural channel.

[7] The stream then runs south under the twin California State Route 73 bridges and enters an underground culvert beneath an onramp.

These include debris basins at the mouth of nearly every major tributary, stretches of lined or unlined flood control channels, and other structures.

[10] The Laguna Canyon area supports a variety of native Southern California wildlife, including large mammals such as mountain lions, bobcats, coyotes and mule deer.

The dominant vegetation cover of coastal sage scrub typically goes through approximately 25-year cycles, with its peak biodiversity reached in roughly 10 years after the beginning of a new 25-year period.

Such periods are typically separated by wildfires, which clear away dead or dying vegetation and leave bare ground for new growth.

[12] Laguna Canyon forms the center section of an approximately 17,500-acre (71 km2) strip of wilderness preserve running northeast–southwest along the Pacific coast.

Lying to the north of Aliso Canyon, the Laguna Canyon area lay within the tribal boundary of the Tongva, a Native American group whose territory expanded from north-central Orange County well past the San Gabriel River and into the Los Angeles Basin.

Aliso Creek, whose watershed borders Laguna Canyon to the east, formed the tribal boundary between the Tongva and Acjachemen.

A Native American path ran through the canyon to the present-day Laguna Beach area, where they fished and collected abalone and limpets.

The Tongva lived in villages of 50-100 people, in huts made of brushes and tules on a wooden framework.

A land grant called La Bolsa de San Joaquín occupied the canyon area up to the 19th century.

The 2,150-acre (8.7 km2)[15] community, which was proposed to contain 3,200 housing units as well as a number of businesses, was canceled in the 1990s after the City of Laguna Beach purchased four of its parcels in order to provide space for a wilderness park, while the City of Irvine purchased one, and Laguna Coast Wilderness Park was opened and dedicated in 1993.

Several years later, two to three thousand gathered to protest the construction of California State Route 73 (which would cross the canyon), but the highway was built eventually.

[22] The northernmost extreme of the canyon is being developed into a residential area consisting of 590 homes, called Laguna Crossing, the first phase of which was opened in 2013.