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Karlobag was, together with Senj, the most important traffic, trade and port centre under Velebit Mountain; the road connection with Lika via Baske Ostarije played an extremely important role. Today Karlobag is interesting for those who want to spend their summer holidays combining the seaside and the mountains. Along with the well-indented coast and clear sea, there are several attractions in the town's hinterlands. Velebit Mountain, rising above Karlobag, deserves a special mention because it has been declared the World Biosphere Reserve. There is also Baske Ostarije (Hotel Velebno), a famous hiking centre, with its refreshing climate even when there is summer heat on the coast. The river Gacka represents a heaven for anglers and a piece of intact nature to enjoy. Mountain lovers can walk along the marked paths: to the south, to Paklenica National Park, or towards the north to Premuzic's Trail and farther on.

KARLOBAG, a town and port in the Velebit Channel, in the region of the Velebit slopes, opposite the island of Pag, with the 1.8-km wide Velebit Channel between them; population 467. At the end of the last century the island was called Bag. The development of Karlobag is linked with the passes Ostarija (Ostarijska Vrata) and Baske Ostarije (955 m), through which the road to Gospic runs at a height of 928 m. Together with the Vratnik Saddle above Senj, this is the lowest pass over Velebit and the most suitable connection between the central part of the Lika region and the sea. The favourable traffic connections with the hinterlands gave rise to creation of settlements already in Roman times.

Chief occupations are fishery and tourism. The town lies at the intersection of the main road Rijeka - Zadar (M2, E65) and the regional road Karlobag - Gospic.