Located at the center of the Labyrinth, right next to Junk City, Goblin City is the home to Jareth's Castle. The goblins spend much of their time in the castle rather than in the city, so the streets frequently appear empty other than a few chickens running around. Around the city stands a large wall with two doors, one inside the other. The first door is guarded by a sleeping goblin, while the second is guarded by Humongous.

The city was the setting for a great battle, fought between the goblins and Sarah's friends.