Santorini is essentially what remains of an enormous volcanic explosion, destroying the earliest settlements on what was formerly a single island, and leading to the creation of the current geological caldera.

A giant central lagoon, more or less rectangular, and measuring about 7.5 by 4.3 mi, is surrounded by 980 ft high steep cliffs on three sides. The island slopes downward from the cliffs to the surrounding Aegean Sea. On the fourth side, the lagoon is separated from the sea by another much smaller island called Therasia; the lagoon merges with the sea in two places, in the northwest and southwest. The water in the centre of the lagoon is nearly 1,300 ft deep, thus making it a safe harbor for all kinds of shipping. The island's harbors all lie in the lagoon and there are no ports on the outer perimeter of the island; the capital, Fira, clings to the top of the cliff looking down on the lagoon.
In 1956 a major earthquake and a volcanic eruption resulted in the demolishing of many buildings on the island, leading to the desertion of many of its villages.

The expansion of tourism has resulted the growth of the economy and population.