The town came into existence in 1849 as one of the many stopover points on the route from the Burra copper fields to Port Wakefield. The town proper was established in 1870 by an Adelaide grain merchant, Charles Fisher. It was named after the famous Crimean War Battle of Balaklava which Fisher reversed the usual process by building large wheat stores hoping that the commercial advantage would attract farmers to the area. The reason for this unusual development was that a 'tramway' had been completed between Hoyleton and Port Wakefield in 1870 and there was no stopover point on the route. Fisher's instincts were correct. Sheep and wheat farmers moved into the area. The first meeting of the town council occurred in 1878 and by 1885 the town had a population of 550.
Even today the town, on the flat countryside, is economically driven by wheat and sheep. It is characterised by a large number of old style sandstone houses and the distinctive curio of an elaborate 'Keep Left' sign in the centre of town which is notable for the fact that the solitary light globe has an overhead powerline which comes down to it.