Vathi, the largest settlement in Ithaca, nestles in the depth of the lacy bay, reminiscent of a fjord. It is called Vathi (meaning deep) because it is situated at sea level while surrounded by mountains. Its shelter, which is one of the safest in Greece, hosts tourist boats and fishing boats, while most ferry routes connecting the island with Kefalonia, Patras and Etoloakarnania are performed by the port of Piso Aetos due to shorter access.

Vathi was inhabited in the 17th century when the threat of piracy retreated and became the capital of the island in 1797 during the French occupation. In 1807, the French built a stunning castle on the Loutsa hill above the harbor, the view from which is excellent. The city suffered extensive destruction from the earthquakes of 1953, but it was rebuilt while preserving the traditional Ionian architecture with its two storey houses and tiled roofs, and in 1978 it was proclaimed a traditional settlement. Today, Vathi is a lively town with plenty of services and full tourist infrastructure.

At the center of the port of Vathi is the picturesque island Lazareto with the pine trees and the chapel of the Transfiguration of Jesus, which stands there since 1668 and is a pole of attraction for the celebration of romantic weddings. On Venetian rule, the island served as a sanctuary, while in 1817 the English built a two-story building that later served as a prison until 1953, which was demolished by earthquakes.

Other attractions in Vathi include the Ithaca Archaeological and Nautical and Folkloric Museum, the Odysseus statue in the port, the fine wood-carved iconostasis of the Metropolis as well as Agios Nikolaos, in which there is an ecclesiastical picture that is considered to be one of the first works of El Greco, Dominikos Theotokopoulos.

The cove Dexa near Vathi is identified with the ancient Forkynas, the port in which the Phaeacians left Odysseus. A few metres away is the cave of the Nymphs, where Odysseus hid the gifts of the Phaeacians. It is also worthwhile to see in the area, the Alalkomenes and the sanctuary of Apollo in Piso Aetos.

In Vathi one can swim at the beaches of Loutsa and Dexa, while a few minutes by car is located the Mprosta Aetos. These beaches are also suitable for children. Nearby are Sarakiniko and the cosmopolitan beach of Filiatro.