The Milky Way and the Andromeda Galaxy are a binary system of giant spiral galaxies belonging to a group of 50 closely bound galaxies known as the Local Group, itself being part of the Virgo Supercluster.

Two smaller galaxies and a number of dwarf galaxies in the Local Group orbit the Milky Way. The largest of these is the Large Magellanic Cloud with a diameter of 20,000 light-years. It has a close companion, the Small Magellanic Cloud. The Magellanic Stream is a peculiar streamer of neutral hydrogen gas connecting these two small galaxies. The stream is thought to have been dragged from the Magellanic Clouds in tidal interactions with the Galaxy. Some of the dwarf galaxies orbiting the Milky Way are Canis Major Dwarf (the closest), Sagittarius Dwarf Elliptical Galaxy, Ursa Minor Dwarf, Sculptor Dwarf, Sextans Dwarf, Fornax Dwarf, and Leo I Dwarf. The smallest Milky Way dwarf galaxies are only 500 light-years in diameter. These include Carina Dwarf, Draco Dwarf, and Leo II Dwarf. There may still be undetected dwarf galaxies, which are dynamically bound to the Milky Way. Observations through the zone of avoidance are frequently detecting new distant and nearby galaxies. Some galaxies consisting mostly of gas and dust may also have evaded detection so far.

In January 2006, researchers reported that the heretofore unexplained warp in the disk of the Milky Way has now been mapped and found to be a ripple or vibration set up by the Large and Small Magellanic Clouds as they circle the Galaxy, causing vibrations at certain frequencies when they pass through its edges. Previously, these two galaxies, at around 2% of the mass of the Milky Way, were considered too small to influence the Milky Way. However, by taking into account dark matter, the movement of these two galaxies creates a wake that influences the larger Milky Way. Taking dark matter into account results in an approximately twenty-fold increase in mass for the Galaxy. This calculation is according to a computer model made by Martin Weinberg of the University of Massachusetts, Amherst. In this model, the dark matter is spreading out from the galactic disc with the known gas layer. As a result, the model predicts that the gravitational effect of the Magellanic Clouds is amplified as they pass through the Galaxy.

Current measurements suggest the Andromeda Galaxy is approaching us at 100 to 140 kilometers per second. The Milky Way may collide with it in 3 to 4 billion years, depending on the importance of unknown lateral components to the galaxies' relative motion. If they collide, individual stars within the galaxies would not collide, but instead the two galaxies will merge to form a single elliptical galaxy over the course of about a billion years.