The town was founded in 471 BC as Pixunte (Pixous), a colony of Magna Graecia. During fascist period, with the union of municipalities of Ispani and S.Marina, Policastro became an hamlet of Capitello.
The town is located in the southern side of Cilento, not too far from the national park, in the middle of its gulf by Tyrrhenian Sea. Situated by the estuary of river Bussento it is far 10 km (north) from Sapri, 5 from S.Marina, 4 from Scario (hamlet of San Giovanni a Piro), 25 from Marina di Camerota (hamlet of Camerota) and almost 90 from Salerno. The nearest villages by the sea are Capitello (hamlet of Ispani, far 2 km) and Villammare (hamlet of Vibonati, far 4 km).
Policastro is a receptive town for tourism, especially in summer, due to the quality of its water, its rural surroundings and to a good rail link. The town is also known because it has got lot of campings.