The Río Ibáñez originates from snowfields and glaciers on the southeastern flanks of Hudson Volcano in the Aysén Region of Chile. From its headwaters, the river runs approximately 88 km before emptying into Lago General Carrera, the second-largest lake in South America. Its course follows a roughly southeast direction for the first 30 km, then turns east for another 30 km, before shifting southeast again for the final 28 km to its mouth. The river drains a basin of approximately 2,377 km², and its mouth sits at an elevation of 217 m above sea level.

The river flows along the southern boundary of the Cerro Castillo National Reserve, whose centerpiece is the dramatic basalt peak of Cerro Castillo. The valley is characterized by rugged Andean terrain, with glaciers and fertile valley floors visible along the corridor. A notable waterfall, the Salto del Río Ibáñez, is one of the recognized natural features of the area. The Carretera Austral runs through the valley, including a switchbacked section known as the Cuesta del Diablo, which provides road access along the river corridor.

Puerto Ingeniero Ibáñez sits near the mouth of the river on the shore of Lago General Carrera, and serves as the main population center in the area. From this port, ferry service connects to Chile Chico across the lake. The town of Villa Cerro Castillo lies upstream within the river's watershed. The Carretera Austral connects the area to Coyhaique, approximately 108 km to the north on a paved road.

The broader region is known for glaciers, boating, and tours, and the area around Lago General Carrera includes the Capilla de Mármol near Puerto Río Tranquilo and the Glaciar Exploradores. The river's flow can be influenced by volcanic activity from Hudson Volcano, which is an important consideration for anyone planning a trip in this corridor. The surrounding landscape transitions from high Andean terrain near the headwaters to broader valley floors approaching the lake.