Watson Lake is often called "The Gateway to the Yukon." The community is located in the southeastern corner of the Territory, just 14 km from where the Alaska Highway crosses the British Columbia border. Watson Lake is a key transportation hub. It sits at the junction of the Alaska Highway, the Robert Campbell Highway to the central Yukon and the Northwest Territories, and the Stewart-Cassiar Highway from central British Columbia. The Yukon's capital, Whitehorse, is 455 kilometres to the northwest.
The community of Watson Lake consists of the town of Watson Lake and the adjoining settlements of the Liard First Nation, including Upper Liard. Watson Lake lies within the traditional territory of the Liard First Nation, part of the Kaska Tribal Council. A community was established at Watson Lake in 1939, when the Canadian government decided to build a chain of airports across the North, including one at Watson Lake. The new community was a supply and accommodation centre for airport construction in 1941 and for the building of the Alaska Highway a year later. After these were completed, Watson Lake became a service centre for the highway and, later, for the resource-rich region of the upper Liard River and its tributaries.