The area was settled by Europeans during the period of British colonisation of South Australia in 1839, with the town laid out in 1849.

[3] The name of the town was derived from a name takes its name from the Kaurna word Ityangga, meaning "over there"[4] or "close by".

This led to a gold rush; however, it did not last long, with the diggings exhausted and all but abandoned within a year.

In 1868 more gold was discovered at nearby Jupiter Creek, which proved to be a much larger and long-lived field.

[3] For a brief time Echunga prospered and it has been estimated that at its peak it had grown to a population in excess of 1,200.