Måløy is located on the southeastern side of the island of Vågsøy, about 3 kilometres (1.9 mi) northeast of the village of Holvik and about 6 kilometres (3.7 mi) south of Raudeberg. The Måløybrua connects the town to the village of Degnepoll on the mainland.

Måløy is one of the most important fishing ports in the region. In 1997, Måløy was allowed by the municipality to call itself a town. Måløy has a population (2009) of 3,026 and a density of 1,427 people per square kilometre.

Måløy was originally founded as a trading center on the small island of Moldøen, or Måløya, on the sound of Ulvesundet between Vågsøy and the mainland. As trade flourished, the town gradually moved to the larger island of Vågsøy, while keeping the name of the smaller island. This is the cause of some confusion, although the smaller island is today often known as "Lisje-Måløyna" (literally smaller Måløy) or "Øyna" (literally the island). During World War II, it was used as a German coastal fortress, which led to the eradication of all settlement on the island to make room for the fortress, and as a result of Operation Archery in December 1941.

The town square in Måløy has a monument over the denizens of Sør-Vågsøy and Davik municipalities who fell in World War II. Another monument, located elsewhere in the town, is a memorial to Martin Linge, the only Norwegian who died during Operation Archery. Few streets in Måløy are named; most, especially the ones on the hillside, are only numbered.