The dam is built between two hillocks (part of the Western Ghats) across the Paralayar River, a tributary of the Tamaraparani River, also known locally as the Kuzhithuraiar, and is part of the basin that constitutes the west-flowing rivers from Tadri to Kanyakumari. Tamaraparani River rises in the Western Ghats and flows through a distance of before debouching into the Arabian Sea. The catchment area at the Perunchani Dam site is . The reservoir is thickly forested and inhabited by wild animals such as tiger, elephants, and deer. The tribal community of Kanikars resides around the periphery of the reservoir.