Mountshannon is located at Lough Derg, in County Clare which is one of the major freshwater lakes of Ireland. The lake is of significant ecological interest, with five habitats listed on Annex I of the EU Habitats Directive.

During the summer months the harbour area is used for boating, kayaking and paddle boarding, and there is a shallow swimming area nearby. The beach area has a lifeguard service during the bathing season.