The town was gazetted in 1913, and is named after “Carnamah”, the name of a pastoral property established by Duncan Macpherson in this location in the late 1860s. A telegraph station was established here in 1873, and is referred to in 1876 by the famous explorer Ernest Giles. Giles spells it “Cornamah” in his book, but “Carnamah” on his map. Macpherson’s property “Carnamah” derives its name from Carnamah Spring. The name is probably Aboriginal of unknown meaning, or possibly is a Gaelic word meaning “cairn of the cattle” or “cattle rocks”. The population of the town is approximately 400.
The Carnamah area was first settled in the 1860s when Duncan McPherson moved sheep across from the coast and took up land to the east of the present townsite. McPherson’s Homestead, an excellent example of the pioneering architecture of the area, was built in 1869.
Settlement of the area was slow in spite of the fact that it enjoys a good rainfall (about 400 mm per annum) and the land is quite fertile. It was not until after World War I, when a War Service Farming Scheme was established at nearby Yarra Yarra Lakes, that the district’s population began to expand. Some further War Service Farms were released in the 1950s after World War II.
Today the town is a service centre for the surrounding wheat, sheep and mixed farming properties. Like nearly all of the Central West the area is noted for its wildflower displays in late winter and early spring with the area around the Yarra Yarra Lakes being particularly attractive.