The history of European exploration of the Streaky Bay area starts with the Dutch sailors who accompanied Pieter Nuyts on his 1627 voyage across the Great Australian Bight. Nuyts reached the South Australian coast near Streaky Bay before turning westward and heading to the Dutch East Indies. His visit to the area is recalled on the Pieter Nuyts Monument in the median strip on Bay Road near the Community Hotel.
Nuyts was followed, nearly two centuries later, by Matthew Flinders who in 1802 explored the entire coast of the Eyre Peninsula. It is widely accepted that Flinders named the bay because of the streaky discolouration he noticed in the water. The discolouration was probably nothing more than seaweed.
In 1839 the explorer Edward John Eyre passed through the area. His journey is recalled in Eyre's Water Hole which is located about 3 km out of Streaky Bay on the road to Port Kenny. A sign at the rather neat and modern water hole points out that 'At this spot, Baxter, after crossing the peninsula from Port Augusta waited in dire anxiety to rejoin his leader, Edward John Eyre, who had ridden from Mount Arden via Port Lincoln.'
Around this time two potential settlers travelled through the area and their report on the lack of water, poor soils and thick mallee scrub did much to discourage settlement of the region.
The area was slowly settled in the second half of the nineteenth century. Pastoralists had settled the area by 1854, by the late 1850s whaling was common along the coast, and in the early 1870s the oyster beds in the area were being harvested so successfully that a small oyster factory was established at Streaky Bay.
The township of Streaky Bay was officially proclaimed in 1872. At the time it was called Flinders but the older name of Streaky Bay persisted. There had been a slow settlement of the area during the previous decade. The first trading store had been built in 1862 and the Hospital Cottage, which still stands in the Hospital grounds, was built in 1864.