It is situated on the northern ridge at an elevation of 860 meters (2,800 feet) overlooking the world's largest erosion cirque, known as the Makhtesh Ramon.

[4] The town's first permanent residents, several young families from Kibbutz Re'im and other parts of Israel began settling there in 1956.

Conditions in the early years were harsh, with limited food supplies and practically no modern-day amenities.

Later, rows of small attached stone houses were built and after that, apartment buildings, beginning in the early 1960s.

On April 29, 1964, a Nord 2501D Noratlas (4X-FAD/044) of the IAF crashed into a mountain near Mitzpe Ramon, killing all nine on board, including pilots Hagay Gilboa and Shlomo Tzlil.

There are moderate to strong winds all year long, caused by its location above the crater, which make Mitzpe Ramon feel much colder than it really is.

[14] The previous mayor, Flora Shoshan, sister of former Israeli defense minister Amir Peretz and wife of the former mayor, Sami Shoshan,[15] was voted out on October 23, 2013, and replaced by Roni Marom, in a landslide victory for Marom.