[1] It is located on the north bank of the Merced River 6 miles (9.7 km) east of Snelling,[2] at an elevation of 348 feet (106 m).

[2] The town was founded here because in the California Gold Rush, the three main crossings of the Merced River on the Stockton - Los Angeles Road were located within 2 miles (3.2 km) downstream of the rapids of Merced Falls.

[3] The rapids of Merced Falls was used in the 1890s to power several watermills located in the town.

A pair of sawmills in Merced Falls cut wood for the Yosemite and Sugar Pine Lumber Company, which shipped lumber down from the Sierra Nevada on the Yosemite Valley Railroad.

The city continued to function well into the 1920s as a hub for tourists travelling into Yosemite Valley via the railroad.