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It is believed that prior to European settlement the area was inhabited by the Gumbaynggir or the Dainggatti peoples.
Europeans may have explored the area in 1818, and John Oxley surveyed the area in 1820. The cutting of Australian red cedar had started in the area by 1842. It is believed that the first house was built in 1867, when about 50 people had settled in the valley to cut cedar or raise corn.
The site of the town was surveyed in 1874 and the first hotel and school were both established in 1884. It was proclaimed a village in 1885. The North Coast railway was extended from Taree to south Grafton in 1915, but the station at Nambucca Heads was not opened until 1923.