The town sits in the valley of the river Oka, which flows into the Gernika estuary. Very close by is the Urdaibai Nature Reserve, which UNESCO has declared to be a Biosphere Reserve.
The cave of Santimamiñe (Kortezubi) shows that the valley has been inhabited since prehistoric times. Inside are cave paintings comparable in terms of quality and richness to those of Altamira. From that period on, Gernika was inhabited by successive civilizations until its foundation as a town in 1366.