The village was first settled by Mennonites in the late 1920s, following the draining of Sumas Lake and the reclamation of the former lake bed for agriculture. It is at the foot of the Skagit Range of the Cascade Mountains on the Vedder River, near the latter's confluence with the Fraser, which traverses the Lower Mainland, of British Columbia. The Lower Mainland Ecoregion is part of the Pacific Maritime Ecozone. The village of Yarrow lies between Vedder Mountain to the south and Sumas Mountain to the northwest. The climate is temperate with most of the precipitation falling in the winter months as rain. The summer is warm and relatively dry. The fertile upper Fraser Valley supports the growth of many varieties of fruit, vegetables and herbs. Yarrow's economy is thus primarily agricultural and includes dairy farms and field crops (blueberries, corn, cole crops and hay).