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Badgastein is situated at an altitude of 1002 m in the valley of the Gasteiner Ache. It is the most important spa in Austria. Bathing cures are already documented from the 14th century. The popularity of the spa increased after 1791–1793 when the bath palace was built. From the second half of the 19th century on it became one of the most popular spas of Europe. The radon-containing thermal waters (47°C) are used primarily for the treatment of rheumatic diseases.

Until the end of the 18th century only foot-paths connected the Gastein valley to the province of Carinthia in the south. In 1901–1909 a tunnel (8.5 km) between Böckstein near Badgastein and Mallnitz opened one of the most important traffic connections between the north and the south.

The waterfalls of the Gasteiner Ache (85 and 63 m) in the centre of Badgastein are one of the best-known landmarks of Austria.

Franz Schubert spent his vacation here in the Gastein valley in August 1825. During his time he composed the lieder "Die Allmacht" and "Das Heimweh" and the so-called 'Gasteiner Symphonie'. He later received a payment of 100 gulden for the manuscript from the Wiener Musikverein (Society of Music Lovers in Vienna). The symphony, however, is missing since then.
 

After the end of the war between Prussia and Denmark of 1864, which ended with a defeat of Denmark, a treaty (the so-called 'Gasteiner Konvention') was signed in Badgastein in 1865 which stipulated that Prussia received the duchies of Lauenburg and Schleswig, whereas Austria was given control over Holstein. Only two years later Austria lost Holstein to Prussia.