The word 'Barunga' derives from an indigenous term meaning "gap in the range".

Robert Barr Smith, the rich and influential new owner of the Hummocks Run,[5] arrived in the locality accompanied by surveyors in February 1870.

[10] The railway line from Kadina to Barunga Gap was begun in approximately August 1877[11] by day labour and piecework, to afford employment for the miners thrown out of work on the (Yorke) Peninsula.

The railway allowed Barr Smith to ship his massive wool exports directly to the Elders & Fyffes cargo ships at Wallaroo[12] for auction in England, and surrounding farmers and graziers to use the port at Wallaroo instead of Port Wakefield, which was shallow and required transshipment to waiting shipping using small boats.

A government town was surveyed in 1879 at Barunga Gap and proclaimed as Percyton in 1880.