Watervale is located on Eyre Creek, which is a tributary of the
Wakefield River. The area on which the town was settled was originally granted to a pioneer named David Davies in 1847 by
Governor Robe, and he named this section of land
Watervale. The area was settled by a number of Protestant families who founded a Bible Methodist Church in the township. The current Uniting Church and accompanying hall are examples of such colonial constructions in the area. The second vineyard in the Clare Valley was planted by Valentine Mayr, who planted four acres at 'Pomona', Watervale in 1852, and made his first wine in 1856. He had thirty acres planted with shiraz and verdelho, which is now the site of Crabtree Watervale Wines, located on North Terrace, just off the Horrocks Highway and not far from the Riesling Trail. The heritage listed Quelltaler Estate dates back to 1865. Francis Treloar, formerly a miner at
Burra, bought 117 acres of land near Watervale in 1851, for a winery which he named Spring Vale. Treloar established the Springvale wine cellars in 1868: sections of these stone cellars, dug into the hillside (as was typical of cellars at that time) survive. In 1890
T. G. H. Buring and Carl Sobels joined forces and purchased the Spring Vale vineyard and plant. This winery subsequently was developed as Quelltaler, known more recently, as Annie's Lane. In 2017 this winery and vineyards were bought by
Seppeltsfield. ==Railway==