Waterdeep, the City of Splendors, lies on the western coast of Faerun, far to the north of Amn. That region is known as "the Sword Coast," because for many years it was ruled by the might of swordarms rather than by any laws or treaties (and some folk in the South still hold it to be so). Waterdeep's boundaries are strictly controlled by the mysterious rulers of the City, the Lords of Waterdeep, and the geography on which the city rests.

Waterdeep's boundaries stop not due to lack of trade or need for space (in all honesty, the excess of both matters strains the city's bounds to this day) but due to the coastlines and the edges of the high, sloping plateau surrounding Mount Waterdeep. The city's best physical defense, beyond its high placement on said plateau, is the Trollwall - an erected barrier 10' to 20' thick in places, so named for its earliest purposes of protecting Waterdeep from the attacks of northern trolls. The wall surrounds the city on the east from its southern tip at the harbour to the northern end of the City of the Dead; it also surrounds the western seacoast and continues around the northern city perimeter to the sheer cliff at the northeast corner of the city, where the precipitous 100' drop protects Waterdeep as well as any wall.

The Trollwall is pierced by four gates: the South Gate; the River Gate; Northgate; and Westgate. Within the walls, the city of Waterdeep sprawls south and west to the seashore and the harbour. Despite the need for further commercial and residential space, an edict of the Lords forbids any habitation or encroachment into the City of the Dead, the public streets, and the slopes of Mount Waterdeep around Castle Waterdeep. Of late, some maverick members of the Surveyors', Map & Chart-makers' Guild have new building designs suitable for construction on the slopes of the mountain and they hope to garner the public's support to challenge the long-standing Lords' ruling and allow new buildings on the eastern slopes of Mount Waterdeep.

Any aerial visitor to the City of Splendors arriving from the south can clearly see the general topography of Waterdeep; the city resembles a flat board raised at its north end and slightly tilted downward on the west, so that it slopes down toward the mountain, leveling off along the Way of the Dragon (a major thoroughfare). Mount Waterdeep is, of course, the highest point in Waterdeep; its sea swept flanks rise to shield much of the city from the worst coastal storm winds, and it peaks some 700 feet above the waves. An aerie for aerial traffic, garrisoned by the city guard, stands below the peak on the landward side. From it, the city's defensive naval combat "throwers" are commanded, and patrol squadrons of griffin riders fly, keeping the skies secure from hostile flying creatures and folk.

The Lords of the city and the watch (the city police) divide Waterdeep into seven districts, or "wards". These are respectively, Castle Ward, Sea Ward, North Ward, Trades Ward, the City of the Dead, Southern Ward, and Dock Ward. Divisions between these districts are not obvious to a visitor to the city, though the natives know the wards and their boundaries by heart. Industry and other activities are not restricted to any one specific ward (the exception being the City of the Dead, the only legitimate burial ground).