Once inhabited by the Dyirringany Aborigines the area was first explored by Europeans when Bass and Flinders travelled up the Pambula River and Lake while on a voyage south in 1797.
The Imlay Brothers owned land from Broulee to south of Twofold Bay and west to the mountains by the 1830s. The economic depression of the early 1840s resulted in the loss of their property to Sydney merchants, the Walker Brothers, who in turn sold their leases to the newly formed Twofold Bay Pastoral Association in 1852.
Merimbula began its existence as a private village belonging to the Association which opened it as a port in 1855. All that remains of the original port are two sheds.
A postmaster was appointed in 1857 and allotments of land went on sale in 1860 when the Association was dissolved. The first ferry service across the 'lake' was established in 1857 and a bridge constructed in 1908 (replaced in 1982).
Aborigines inhabited South Merimbula until early this century and given that oyster farming is still a major industry, a large number of middens have been found on both sides of the lake.
By 1866 the town's population was around 90. There was a weekly steamship service from Bega to Merimbula and an eight-horse wagon followed this route on a weekly basis two years later. After this the town continued to grow slowly as a service centre for the surrounding rural area. It was not gazetted until 1912 and little changed until the 1950s when it first became a popular holiday resort.