Algonquin and Huron native tribes originally occupied this land. In 1868 the Free Land Grant and the Homestead Act passed, which gave 200 acres of land to families who met specific criteria. A set of requirements issued for each piece of land, and if these requirements were met, the settler could then apply to purchase the land.

Settlement was slow prior to the passing of the Free Grant and Homestead Act of 1868. The obligations of the settlers in this act were "to clear and have under cultivation at least 15 acres, two acres of which were to be cleared annually during the 5 years following the date of location; to build a house at least 16'x20' and to maintain residence on the land for 5 years after date of location". Each settler over 18 years of age could receive 100 acres or with a family 200 acres.

In 1875, the railway reached as far as Gravenhurst and by 1885 travel to Bracebridge was possible. Extending the rail line provided better transportation between townships.

Upon exploring the area in 1865 and realizing the beauty of Muskoka's landscape, Alexander P. Cockburn who revolutionized the transportation industry in Muskoka wanted to make the area more accessible. Its first steamship named Wennah, with support from the government was constructed and launched by 1866.

Benjamin Hardcastle Johnson built a house on the river, which became the region's first post office. Johnson also successfully petitioned for a canal to connect Lake Muskoka and Lake Rosseau. Although they are not as crucial for transportation, steamships remain an integral part of Muskoka tourism today. Several local companies offer scenic boat cruises on the area lakes.

Around the turn of the 20th century, many elite society members began making Muskoka their summer residence. The steamboat departing from Gravenhurst brought them to their luxurious cottages, which still line the shores of Lake Muskoka today. This assortment of glorious summer homes, referred to as Millionaire's Row. Resorts, lodges and other luxury accommodations also constructed at this time, which continue to contribute to Muskoka's prosperous tourism industry. The tourism industry "took off" after 1896.