Killarney's established community was founded in 1820 by Étienne De La Morandière (although indigenous peoples were living there prior), a French Canadian originally from
Varennes,
Quebec and a fur trader in
Sault Ste Marie, Michigan, along with his wife Josette Sai Sai Go No Kwe, an indigenous woman from Michigan and a close relative of Chief Kitchi, meaning Big Gun. Soon after the arrival of the De La Morandières, many French-Canadian families started to settle in Killarney, starting many fishing businesses in the process. Although there was already an existing settlement here at that time, they are credited with the founding of the settlement. The population increased when the logging industry took off in Colins Inlet in the late 1800s. Hundreds of people from around
Ontario went to Colins Inlet for work and established a large community in the area. The logging industry collapsed in the early 1900s because of the low demand and the population declined. Remains of the large village can be seen across from the present-day Mill Lake lodge. In 1929, the place was originally incorporated as the Township of Rutherford and George Island. Another key industry that had a major impact on Killarney's economy was the
fishing industry. There were many fishing companies in Killarney including C.W.L (Charles William Low), The Nobles, Charles Low/Joseph Roque partnership, and Albert Lowe. The collapse of the fishing industry at the end of the 1950s affected many families in Killarney including the Low, Roque, Jackman, Proulx, and Herbert families. Recreational fishing was also an industry. A fishing camp was run by the
Fruehauf Trailer Company out of Detroit, Michigan. Roy Fruehauf, president of the company from 1949 to 1961, was primarily responsible for operating Killarney Mountain Lodge. Clients and guests would be flown in via
Mallard sea planes for vacations during the warmer summer months. A quarry in Killarney Bay had fixed this issue for many families by creating more employment opportunities in the area. The quarry is located on the westside of the Landsdowne channel and had been very financially efficient after the downfall of the fishing industry.The quarry eventually was shut down in 2016 over a labour dispute and the industry that replaced it was tourism. The major tourism businesses in Killarney were the
Killarney mountain lodge, the Sportsmans Inn, the Killarney Bay Inn, the Pines Inn, Herbert fisheries, and Pitfield's General Store. The booming tourism industry brought hundreds of thousands of dollars to the businesses of Killarney as well as the many families that contributed to it. The current tourism businesses of Killarney include the Killarney Mountain Lodge, the Sportsmans Inn, Gateway Marina, Herbert fisheries, and Pitfield's General Store. When and why the place name Shebahonaning was changed to Killarney is unknown.
Lady Dufferin, wife of the Governor-General of Canada, has often been credited with the name change, but the passage in her journal which describes their stop in Killarney is dated 1874—almost twenty years after the Post Office had replaced the Shebahonaning postal stamp with one reading Killarney. In July 1962,
Highway 637 was established, connecting Killarney to major highways like
Highway 69 and
Highway 17, making it easier for people to travel to major cities like
Toronto or
Sudbury. Before that, the people of the town had to either go by boat in the summer to
Little Current and then take a train to Sudbury or other areas to obtain food and resources or by horse and buggy in the winter. On January 1, 1999, the Ontario provincial government merged the Township of Rutherford and George Island (having an area of in the 1996 census) with large tracts of surrounding unincorporated areas, forming the new Municipality of Killarney (with an area of in 2001 census). The municipality was also transferred from the
Manitoulin District to the
Sudbury District at that time. In 2006, the municipality was enlarged again (to ) when it annexed the
unorganized mainland portion of Manitoulin District. By the 2021 census, its territory was reduced to due to the incorporation of
Point Grondine 3 reserve. ==Geography==