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The area in which Oudtshoorn is situated was originally inhabited by the Bushmen, as evidenced by the many rock paintings that are found in caves throughout the surrounding Swartberg mountains.The first European explorers of the area was a trading party led by a certain Ensign Shrijver, who were guided there by a Griqua via an ancient elephant trail in January 1689.The expedition reached as far as present-day Aberdeen before turning back and exiting the Klein Karoo valley through Attaquas Kloof on 16 March of the same year. However, it was only a hundred years later that the first farmers started settling in the region.

The first large permanent structure of the Klein Karoo, a church of the Dutch Reformed denomination, was first erected in 1839 near the banks of the Grobbelaars River. The village (and later town) of Oudtshoorn gradually grew around this church; it was named after Baron Pieter van Rheede van Oudtshoorn, who was appointed Governor of the Cape Colony in 1772 but died on the voyage out.

A small one-room school was opened in 1858, followed by the formation of a municipality and the founding of an Agricultural Society in 1859. During the same year work was also started on a larger church to replace the original small one.

Unfortunately, 1859 also signalled the start of a long and serious drought which severely depressed the national economy - by 1865 there was serious poverty. When the drought was finally broken by floods in 1869 the depression lifted and Oudtshoorn was transformed from a struggling village to a town of great prosperity.