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Clay City is located in southeastern Clay County at 38°41′13″N 88°21′11″W / 38.68694°N 88.35306°W / 38.68694; -88.35306 (38.686883, -88.353121), about 1 mile (1.6 km) southwest of the Little Wabash River . U.S. Route 50 passes through the southern side of the village, leading west 7 miles (11 km) to Flora and east 15 miles (24 km) to Olney . Louisville , the Clay County seat, is 14 miles (23 km) to the northwest.