It is located on the Ballarat-Colac Road, 33 kilometres (21 mi) from Ballarat and 70 kilometres (43 mi) from Colac. There is no clearly defined town centre, though the Dereel Soldiers' Memorial Hall, located on Swamp Road, is commonly considered as the town centre.
Dereel Post Office opened on 1 November 1868 and closed in 1971.[3]
Dereel includes a large wetlands area, referred to as the "Swamp" or "Lagoon". In recent years it is almost dry.
On 27 March 2013, a bushfire at Dereel destroyed 16 houses and 18 sheds. The fire covered 1,300 hectares (3,212 acres).[4]