Jellico is centered around the junction of U.S. Route 25W (North Main Street and 5th Street), which connects Jellico to Interstate 75 to the southeast and Corbin, Kentucky to the north, and Tennessee State Route 97 (South Main Street), which connects Jellico with Huntsville, Tennessee to the southwest. The Tennessee-Kentucky state line forms Jellico's official northern boundary, although houses and businesses associated with the city are on both sides of the border.
According to the United States Census Bureau, the city has a total area of 4.4 square miles (11.5 km²), of which, 4.4 square miles (11.3 km²) of it is land and 0.1 square miles (0.2 km²) of it (1.58%) is water.
As of the census of 2000, there were 2,448 people, 1,022 households, and 657 families residing in the city. The population density was 561.7 people per square mile (216.8/km²). There were 1,105 housing units at an average density of 253.5/sq mi (97.9/km²). The racial makeup of the city was 96.24% White, 1.96% African American, 0.16% Native American, 0.65% Asian, and 0.98% from two or more races. Hispanic or Latino of any race were 0.37% of the population.
There were 1,022 households out of which 26.7% had children under the age of 18 living with them, 44.1% were married couples living together, 16.2% had a female householder with no husband present, and 35.7% were non-families. 32.8% of all households were made up of individuals and 17.1% had someone living alone who was 65 years of age or older. The average household size was 2.29 and the average family size was 2.90.
In the city the population was spread out with 21.0% under the age of 18, 8.7% from 18 to 24, 24.1% from 25 to 44, 25.1% from 45 to 64, and 21.0% who were 65 years of age or older. The median age was 42 years. For every 100 females there were 82.8 males. For every 100 females age 18 and over, there were 78.3 males.
The median income for a household in the city was $20,303, and the median income for a family was $25,709. Males had a median income of $27,619 versus $16,953 for females. The per capita income for the city was $11,587. About 28.8% of families and 31.9% of the population were below the poverty line, including 45.3% of those under age 18 and 23.2% of those age 65 or over.
The name "Jellico" is a regional corruption of "Angelica," an herb that grows in abundance in the surrounding mountains. The name was first applied to the mountains to the west and to the mountains' main drainage, Jellico Creek, which empties into the Cumberland River near Williamsburg, Kentucky. In the early 1880s, a high quality bituminous coal was discovered in the Jellico Mountains, and with the completion of railroad tracks to the area in 1883, coal mines quickly sprang up throughout the area. The city of Jellico was initially founded as Smithburg in 1878, but changed its name to "Jellico" in 1883 to capitalize on the growing popularity of Jellico coal. The city was incorporated on March 7, 1883.
Throughout the 1890s and early 1900s, Jellico was one of the most productive coal fields in Kentucky and Tennessee. In 1906, a railroad car packed with dynamite exploded in Jellico, killing eight and destroying part of the town. The town quickly recovered, however, and many of the buildings in the Main Street area date from this recovery period. In 1999, much of North and South Main Street was placed on the National Register of Historic Places as the Jellico Commerical Historic District.
Jellico Community Hospital is the largest employer with approximately 350 employees.