Cave Junction is located in the Illinois Valley, where, starting in the 1850s, the non-native economy depended on gold mining. After World War II, timber became the main source of income for residents. As timber income has since declined, Cave Junction is attempting to compensate with tourism and as a haven for retirees. Tourists visit the Oregon Caves National Monument, which includes the Oregon Caves Chateau, as well as the Out'n'About treehouse resort and the Great Cats World Park zoo.
As of the census of 2000, there were 1,363 people, 603 households, and 356 families residing in the city. The population density was 828.8 people per square mile (320.9/km²). There were 730 housing units at an average density of 443.9/sq mi (171.9/km²). The racial makeup of the city was 92.30% White, 0.29% African American, 2.05% Native American, 0.66% Asian, 0.37% Pacific Islander, 1.17% other races, and 3.15% from two or more races. Hispanic or Latino of any race were 5.50% of the population.
There were 603 households out of which 28.7% had children under the age of 18 living with them, 39.8% were married couples living together, 14.3% had a female householder with no husband present, and 40.8% were non-families. 33.7% of all households were made up of individuals and 20.6% had someone living alone who was 65 years of age or older. The average household size was 2.26 and the average family size was 2.87.
In the city, the age population was spread out with 26.8% under the age of 18, 7.7% from 18 to 24, 21.9% from 25 to 44, 21.9% from 45 to 64, and 21.8% who were 65 years of age or older. The median age was 40 years. For every 100 females there were 85.7 males. For every 100 females age 18 and over, there were 79.8 males.
The median income for a household in the city was $17,161, and the median income for a family was $22,500. Males had a median income of $20,893 versus $16,333 for females. The per capita income for the city was $10,556. About 23.6% of families and 28.7% of the population were below the poverty line, including 35.8% of those under age 18 and 11.9% of those age 65 or over.
The Illinois Valley Airport, also known as the Siskiyou Smokejumper Base, was built by the US Forest Service. It operated from 1943 to 1981 as a smokejumper base, during which time the smokejumpers parachuted on 1445 fires for 5390 fire jumps. As of 2007, the airport had a fixed base operator, aircraft rentals and instruction, hangar rentals, and a restaurant.