1 is located approximately 12 miles (19 km) upstream from the mouth of the Ocoee, in an area where the river emerges from its winding trek through the Appalachian Mountains and enters the Tennessee Valley.

The community of Parksville is located on the north side of the dam, and Chattanooga is roughly 30 miles (48 km) to the west.

[1] The rapid growth of industry in Chattanooga in the late 19th century and early 20th century brought an increasing demand for electricity, and the rapid-flowing Ocoee River—which passes through a gorge in the mountains 30 miles (48 km) east of the city—was considered a prime candidate for hydroelectric power by the region's early electric companies.

Clark Company, an electrical transportation holding firm, formed the Eastern Tennessee Power Company to build two hydroelectric dams on the Ocoee and market their electricity output primarily to Chattanooga.

[5] Power was distributed primarily to Chattanooga and also to Knoxville, Nashville, and Rome, Georgia, as well as the aluminum industries in Alcoa.

[5] A coal burning station known as the Parksville Steam Plant was built adjacent to the dam in 1916 to provide generation during periods of low water flow.