Balsam is located near Balsam Gap, a mountain pass between the Great Balsam Mountains and the Plott Balsams, two of the highest ranges in the Appalachian Mountains. The town and ranges are named after the nicknames of the red spruce and Fraser fir (he-balsam and she-balsam, respectively), which are the dominant tree types at the highest elevations in the Southern Appalachian mountains.