Kandersteg is located on the northern side of the Bernese Alps at an altitude of 1200 metres above sea level at the foot of the Lötschen and Gemmi Passes. The village, consisting of 1200 inhabitants, lies in the upper Kander Valley. The municipality extends on a territory encompassing the valleys of Gastern (upper Kander Valley) and Oeschinen. It includes the villages of Kandersteg and Gastern.
Kandersteg is surrounded by high mountains. The Balmhorn (3,698 metres), bordering the canton of Valais on the south, is the highest in the valley; it is followed by the Blüemlisalp (3,663 metres), east of the village. The Gross Lohner (3,049 metres) is the highest summit between the Kander Valley and the valley of Adelboden on the west. The Hohtürli pass (2,778 metres) on the east connects Kandersteg to Griesalp in the Kiental valley.