The Thomson River rises below Newlands at the north western end of the Baw Baw Plateau of the Great Dividing Range, where it shares a watershed with the Yarra and Tanjil rivers. From its source, the river flows generally north, then east, then south southeast through its impoundment, then southeast, then east, and finally east by south, joined by seventeen tributaries including the Jordan, Aberfeldy, and Macalister rivers, before reaching the Latrobe River near Sale. The river descends 970 metres over its 170-kilometre course.

The river is impounded not far below its source by the Thomson Dam, creating Thomson Reservoir. The reservoir provides around 70% of Melbourne’s water storage and supplies about 30% of Melbourne’s water needs.This takes about 50% of the river’s natural flow, which places a great environmental stress downstream. It particularly affects the Gippsland Lakes, which include Lake Wellington, Lake Victoria and Lake King. This area has international significance as a Ramsar listed wetland site.

Anglers can access the Thompson River at a variety of sections including at Sale, Cowwarr, and Heyfield.