It is situated in the Ore Mountains, on the river Zschopau, 22 km southeast of Chemnitz.

The town is situated on a rocky spur near the confluence of the Zschopau and Preßnitz rivers.

A great fire occurred in 1687, necessitating the rebuilding of the church which was consecrated again in 1689.

From 1929 to 1931 a bypass road was built, which necessitated a new bridge across the Zschopau river and the railway.

An aerial night attack from 14 to 15 February 1945 killed six people, and destroyed or damaged more than 200 buildings.

On 1 January 1999, the hitherto separate municipalities of Falkenbach, Gehringswalde, Hilmersdorf und Schönbrunn joined Wolkenstein.

[3] The area of the former paper mill was sold in summer 2003, and a supplier for the automotive, medical, and electrical industry started production of turned parts from there.