The word we use for a perfect society was built to mean "nowhere." Its inventor made sure the joke was on the title page.
Thomas More, the English lawyer and statesman, published Utopia in Latin in 1516. Erasmus oversaw the first printing, in Leuven. The book describes an island with an ideal social and political order, reported by a traveler who claims to have lived there.
More assembled the island's name from two Greek pieces. Ou means "not," and topos means "place." Latinized, that gives Utopia, literally "no place." The perfect country, in other words, announces in its own name that it does not exist.
More kept the gag going through the book. According to Wikipedia's summary of the text, the traveler is Raphael Hythlodaeus, a name read as "dispenser of nonsense." A river is the Anydrus, "no water." Readers who knew Greek were meant to catch the wink.
There is a second pun, and it is where the story gets muddled. A short verse printed with the book has the island say it deserves a better name. In Robinson's English it reads: "not Utopie, but rather rightely my name is Eutopie, a place of felicitie." Greek eu means "good," so eutopia is "good place." In English the two words sound nearly alike.
So the "good place" reading is real, but it is a pun layered on top. It is not where the word comes from. Etymonline stresses this point. It calls the belief that utopia derives from eu- an error, and says the arrival of dystopia reinforced it. The prefix is "not," and the "good place" meaning rides along as wordplay.
The book reached English in 1551, in Ralph Robinson's translation, sixteen years after More was executed. The name soon broke loose from the island. Etymonline records utopia for any imagined perfect place by the 1610s. The adjective utopian came to mean impossibly idealistic, and by 1832 a utopian could be a person: a visionary dreamer.
The word's opposite came later. Dystopia, "bad place," borrows the -topia ending and swaps in the Greek dys-, "bad." It only works as an opposite if you hear utopia as "good place," which shows how thoroughly More's pun took over his word.