Los Banos is located on the west side of the San Joaquin Valley, 26 miles (42 km) southwest of Merced,[10] at approximately 118 ft (36 m) elevation. Its coordinates are 37°03′30″N 120°51′00″W. The city is at the intersection of California State Route 152 and California State Route 165. To the west is Interstate 5, which runs north-to-south between Sacramento and Los Angeles, the San Luis Reservoir, and the Diablo Range.

According to the United States Census Bureau, the city has a total area of 10.1 square miles (26 km2), of which 10.0 square miles (26 km2) is land and 0.1 square miles (0.26 km2) (1.22%) is water.

The Los Banos area was initially settled, according to Mexican land grant records, back in the 1840s. The first white settler in the area was Uriah Wood, who built his two-room cabin in 1859. The original site of Los Banos was located several miles from the current town center, about a mile and half west of the railroad near present-day Volta. The town was essentially a trading post and received its name when the Post Office was established and the Post Office Department designated the office "Los Banos" after the nearby creek. When the railroad arrived, Los Banos relocated to its present-day site.