Located about halfway between the islands of Lipari and Stromboli, Panarea is the smallest of the Aeolian Islands with an area of only 3.4 square kilometers.

Like other islands in the Aeolian arc, Panarea is part of a large, mostly submerged volcanic apparatus, at a depth of 1200 m to 1700 m, of which the emerged part represents the rim of a volcano-tectonic depression with an elliptical shape oriented in an east-west direction.

The volcanic structure covers a total of 460 square kilometers, going together to form a large cone shaped and modified not only by eruptive activity, but also by faults, erosion and shoreline variations. This results in a west coast characterized by a steep cliff, while to the east and south the slopes slope down to the sea with flat areas.

Then out to sea to the east are a series of rocks (Lisca Bianca, Bottaro, Lisca Nera, Dattilo, the Panarelli, and the Formiche) and the steep islet of Basiluzzo.

Although close to Stromboli, Panarea has a completely different volcanological history: while Stromboli is a still active volcano, Panarea's last eruptions date back tens of thousands of years, and only small traces remain of many volcanic structures.

Panarea therefore although in a state of quiescence, is characterized by manifestations that testify to a very young volcanism. There is in fact, among the islets and rocks to the east of the island, an area characterized by exhalative activity, with active submarine fumaroles, the site of major gaseous emissions in the fall of 2002.