The town is located in fell-region of far northern Finland above the Arctic Circle on the country's western border with Sweden, the Muonio River.

The area has been occupied by humans for at least 10,000 years; their arrival is thought to have coincided with deglaciation at the end of the Younger Dryas.

Remains of eight dwellings from the Middle Stone Age have been excavated on the shore of Lake Akajarvi (fifteen miles from the center of the present-day village).

[6] Prior to the historical period (c.1500 AD) archeological findings in the area are consistent with those known to be of Sámi peoples.

Muonio is good base for exploring the many things to do in the area;[8] it offers a variety of accommodations and commercial supply establishments and is on the E8 highway which goes north to Kilpisjärvi.