It begins its journey as a freshwater river in the Central Highlands at Lake St Clair, descending over 700 metres (2,300 ft) across a distance of more than 200 kilometres (120 mi).

At the settlement of New Norfolk in the Derwent Valley its waters become brackish, flowing through Hobart, the capital city of Tasmania, its seawater estuary eventually empties into Storm Bay and the Tasman Sea.

Additionally, it facilitates marine transportation and various industrial activities, playing a central role in Tasmania's economy and lifestyle.

The largest vessel to ever travel the Derwent is the 113,000-tonne (111,000-long-ton), 61-metre (200 ft) high, ocean liner Diamond Princess, which made her first visit in January 2006.

[citation needed] Now there are more than twenty dams and reservoirs used for the generation of hydro-electricity on the Derwent and its tributaries, including the Clyde, Dee, Jordan, Nive, Ouse, Plenty and Styx rivers.

The Tasmanian Government-backed Derwent Estuary Program has commented that the levels of mercury, lead, zinc and cadmium in the river exceed national guidelines.

[12] A large proportion of toxic heavy metal contamination stems from legacy pollution caused by major industries that discharge into the river including Nyrstar Hobart, a historic smelter establish at Lutana in 1916,[16] and the Norske Skog Boyer paper mill at Boyer which opened in 1941.

[2] In recent years, southern right whales finally started making appearance in the river during months in winter and spring when their migration takes place.

Some females even started using calm waters of the river as a safe ground for giving birth to their calves and would stay over following weeks after disappearance of almost 200 years due to being wiped out by intense whaling activities.