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The broader area around the town, including Hepburn Springs to the north, is known for its natural spring mineral spas and is the location of over 80 per cent of Australia's effervescent mineral water reserve. The Daylesford wine region is fast becoming known as Australia's best Pinot growing region, boasting continuous gold medals and 95 point plus wines. At 616 metres above sea level, it has a cooler, wetter climate than Melbourne. Summer (January–February) temperatures range from 10 to 37 °C, while July temperatures are cold, ranging from about 1–2 °C to 9 °C. Annual precipitation, occasionally falling as snow, averages about 870 mm but has ranged from 445 mm to over 1,350 mm per year.
With 65 mineral springs, the Daylesford-Hepburn Springs region accounts for more than 80 per cent of Australia’s known mineral water springs. As a result, the region has a number of spa developments including Hepburn Bathhouse & Spa, Mineral Spa at Peppers Springs Retreat and Salus Spa, Lake House. The town is also known for hosting a number of annual events, including the ChillOut Festival held during the Victorian Labour Day long weekend in March each year, the largest gay and lesbian festival in rural and regional Australia; the Harvest Week Festival; the Lavandula's Festivals; and the Hepburn Springs Swiss Italian Festival celebrating the town's Swiss-Italian heritage.