The 16-mile long Arroyo Grande Valley moves east from the Pacific Ocean before turning northeast towards Edna Valley. Despite nearly double the total acreage of its northern neighbor, Arroyo Grande Valley contains far less vineyard acreage and far fewer wineries. The soil complex here consists of shale, limestone, and chert marine sedimentary soils combined with volcanic soil.

Arroyo Grande's first grapes were planted in the late 19th century, but commercial wine production was not considered until the 1960's when Jack Foote planted several experimental vineyards here. By the 1980's, a few vineyards had been planted in the eastern portions of the valley. At the time, the western region was considered too cold for wine grapes. This theory was proven incorrect by Champagne Deutz, the historic French champagne house, when they planted vineyards and began producing sparkling wine here in the early 1980's. This was instrumental in driving the designation of Arroyo Grande Valley as an American Viticultural Area in 1990.

 The western portion of the valley is now placed in the region I growing category. This area enjoys a long growing season, partly due to its connection to the coast which allows cool ocean air to flow inland. Chardonnay and Pinot Noir dominant the vineyard plantings here, where several distinct micro-climates provide perfect growing conditions. Chardonnays from Arroyo Grande Valley have similar flavor profiles to Edna Valley, though the Pinot Noirs tend to be leaner and closer to a true Burgundian style.

The valley's eastern section falls into the region III growing category. With higher elevations and less oceanic influence, the eastern regions experience higher temperature swings. Zinfandel, Syrah, and Cabernet Sauvignon are the predominant grapes planted here. Wineries here such as Saucelito Canyon and Rancho Arroyo Grande, use a more cool climate approach to produce more elegant, fruit forward wines than producers in the nearby Paso Robles region.