The town has a picturesque, white-painted town center with irregular streets climbing steep hills around the harbour. The natural beauty of the area makes it a popular tourist destination. The municipality includes numerous islands, which makes it a very popular place in the summer for boaters, who can easily find an island or an inlet for themselves which provides peace and quiet. The number of people in the county at least double in the summer, due to vacationers. There are approximately 1,700 summer cottages ("hytter") around the fjord. Tvedestrand has over 2,000 buildings that are more than 100 years old.
Tvedestrand belongs to the geographical region of Sørlandet. The town itself lies at the end of a picturesque fjord, Oksefjorden (originally Ufsefjorden, meaning the fjord with steep, rocky sides), while the municipality also encompasses the lovely islands Borøy and Sandøy as well as the unique village of Lyngør. Lyngør was acclaimed "Europe's best preserved village" by Europa Nostra in 1991.
The Storelva, one of the Southern Coast's best salmon and sea trout rivers, flows past Nes Ironworks, in Tvedestrand. Tvedestrand municipality includes 162 islands, with a collected coast line of 214 km.
Around 1600 Tvedestrand was mainly a harbour for the Berge and Tveite farms’ boats, hence the name Tvedestrand (strand means beach or coast in Norwegian).
Lyngør was the site of the Battle of Lyngør between English and Dano-Norwegian forces during the Napoleonic wars resulting in the sinking of the last great battleship of the Dano-Norwegian forces, Najaden by the large British ship Dictator in 1812.
The town as it now exists was built in the 19th century as a harbour for Norway's longest existing iron works, Næs jernverk. Lying in the parish of Holt, Næs jernverk has one of the largest and most significant of the surviving mansions in Sørlandet, built by Ulrich Schnell. Schnell bought up various iron works in the neighborhood and set up several sawmills in the district. He obtained a special license to export timber directly from Tvedestrand, establishing the basis for an international harbor.