The town is named for its position at the junction of the Gascoyne and Lyons Rivers. The Gascoyne River was named by the explorer Lieutenant George Grey in 1839 after his friend, Captain J. Gascoyne (RN).
A police station was built in about 1897, and settlers asked the Government to declare a townsite. By 1909, a general store and other buildings had been erected on private land, and in 1912, the Government finally acceded to the request, naming the town “Killili” after a local Aboriginal word meaning “bullrush” following the Surveyor General’s request for a “euphonious native name”. For many years, the police station, road board (1912) and hotel were the only buildings in the area, and in 1938, the Roads Board complained about the name, saying that “Gascoyne Junction” and “The Junction” were the names in common use, and asking the Lands Department to “expunge” the name of Killili. The name was changed and gazetted in 1939.
The local road board office, now a heritage-listed site, was used as a meeting place for local associations, and later as the first school in the area (1960-1965) and, since the late 1990s, as a museum. The town’s population has been stable since the 1950s.