The Danakil Depression lies at the triple junction of three tectonic plates and has a complex geological history. It has developed as a result of Africa and Asia moving apart, causing rifting and volcanic activity. Erosion, inundation by the sea, the rising and falling of the ground have all played their part in the formation of this depression. Sedimentary rocks such as sandstone and limestone are unconformably overlain by basalt which resulted from extensive lava flows.

The Danakil Depression is the hottest place on Earth in terms of year-round average temperatures. It is also one of the lowest places on the planet (100 m below sea level[6]), and without rain for most of the year. Here, the Awash River dries up in a chain of salt lakes such as Lake Afrera, never reaching the Indian Ocean.

Mount Ayalu is the westernmost and older of the two volcanoes at the southern end of the Danakil Depression. The other active volcano, Erta Ale, is one of several crater lakes of lava bubbling from the Earth's mantle. Additionally, the area contains the Dallol sulfur springs, or hot springs. These wet environments at the Danakil Depression are being investigated to help understand how life might arise on other planets and moons. Many microorganisms living here are extremophilic microbes of a major interest to astrobiologists. Among the geological points of interest to tourists are the hydrothermal system of Dallol and the Yellow Lake.
​However recent excavation uncovers artifacts that predates the Axumite civilization. These civilization is now known as Adulitarian. Adulis Bay is named after the site. It is thought that the modern town of Zula may be the Adulis of the Aksumite epoch, as Zula may reflect the local name for the Ancient Greek Adulis.