The village is located along the northern coast of the Saudafjorden about 3.5 kilometres (2.2 mi) southwest of the town of Sauda.

For statistical purposes it is considered a part of the urban area of the town of Sauda.

[2] Historically, Saudasjøen arose as a seaside resort near the small farm of Sauda and it became industrialized in the 1800s.

The municipality was incorporated in 1838 and the village of Saudasjøen became its administrative centre (a position it held until the early 1900s when it was moved to Sauda.

During World War II there was built a large aluminum plant at Nesøyra but production was moved to Årdal in 1947.