Port Underwood is the southernmost part of the Marlborough Sounds with an entrance from the south from Cloudy Bay. Port Underwood was the location of the earliest European settlement in the South Island, with whaler John Guard establishing a shore whaling station in 1828. In June 1840, the South Island signing of the Treaty of Waitangi occured at Horahora Kakahu Island in Port Underwood.
Today, a number of mussel farms are located in Port Underwood. Radiata pine forests occupy a substantial amount of land around Port Underwood. A largely unsealed road links Rarangi with Picton.