Neighboring Brazilian states are (from north clockwise) Mato Grosso, Goiás, Minas Gerais, São Paulo and Paraná. It also borders the countries of Paraguay, to the southwest, and Bolivia, to the west. The economy of the state is largely based on agriculture and cattle-raising. Crossed in the south by the Tropic of Capricorn, Mato Grosso do Sul generally has a warm, sometimes hot, and humid climate, (although frost and icey snow along showers can seldom happen in the southernmost subtropical tip), and is crossed by numerous effluents of the Paraná River.
The state is also famous for its natural beauty, and is a major destination for domestic and international tourism. The Pantanal lowlands cover 12 municipalities and presents an enormous variety of flora and fauna, with forests, natural sand banks, savannahs, open pasture, fields and bushes. The city Bonito, in the mountain of Bodoquena, has prehistoric caverns, natural rivers, waterfalls, swimming pools and the Blue Lake cavern.
The name "Mato Grosso do Sul" literally means "Thick Forest of the South" in Portuguese, a name inherited from its northern neighbour state of Mato Grosso, of which it was part until the 1970s. It is not uncommon for people to mistakenly refer to Mato Grosso do Sul as simply "Mato Grosso". Other names that were proposed, at the time of the split and afterwards, include "Pantanal" (a reference to its best known geographical feature) and "Maracaju" (a reference to the Maracaju Mountain Range that crosses the state from north to south).
The first peoples or indigenous peoples of Mato Grosso do Sul, particularly occupying the Nhande Ru Marangatu tropical rainforested area, are the Guarani-Kaiowá, first contacted by non-indigenous peoples in the 1800s.
In October 11, 1977, the state was created by dividing the state of Mato Grosso. Its status as a state went into full effect two years later on January 1, 1979. The new state also incorporated the former territory of Ponta Porã and the northern part of the former territory of Iguaçu.