The city centre is at the northern edge of Princess Royal Harbour, which is a part of King George Sound. The central business district is bounded by Mount Clarence to the east and Mount Melville to the west. The city is in the local government area of the City of Albany.
The Albany settlement was founded on 26 December 1826 as a military outpost of New South Wales as part of a plan to forestall French ambitions in the region. To that end, on 21 January 1827 the commander of the outpost, Major Edmund Lockyer, formally took possession of the western third of the continent for the British Crown.
The settlement was initially named Frederick Town in honour of Prince Frederick, Duke of York and Albany. In 1831, the settlement was transferred to the control of the Swan River Colony and renamed Albany by Lieutenant-Governor James Stirling.
During the last decade of the 19th century the town served as a gateway to the Eastern Goldfields. For many years, it was the colony's only deep-water port, having a place of eminence on shipping services between Britain and its Australian colonies. The opening of the Fremantle Inner Harbour in 1897, however, saw its importance as a port decline, after which the town's industries turned primarily to agriculture, timber and later, whaling.
Today as a city it is the southern terminus for tourism in the region, and the state's South West, which is known for its natural environment and preservation of heritage. The town has a role in the ANZAC legend, being the last port of call for troopships departing Australia in the First World War. Also an auxiliary submarine base for the US Navy's 7th Fleet was developed during the Second World War in the event the submarine base at Fremantle was lost. Also in the harbour was an RAN Naval Installation which provided for alongside refuelling from four 5000 ton fuel tanks.