The municipality covers an area of 1,109 square kilometres (428 sq mi) between the Indian Ocean and the Outeniqua Mountains around the town of Knysna.

At the end of the apartheid era, the area that is today the Knysna Municipality formed part of the South Cape Regional Services Council (RSC).

The coloured residents of Hornlee (Knysna) and Smutsville (Sedgefield) were governed by management committees subordinate to the white councils.

In October 1995 the local councils of Belvidere Estate, Brenton-on-Sea and Noetzie, and the Rheenendal Management Committee, were all converted to TLCs without negotiations and with the existing councillors retained in office.

The Democratic Alliance (DA) then formed a minority coalition government with the Knysna Independent Movement (KIM).

[6] Joy Cole was first elected mayor under the DA in December 2000 but defected in the September 2004 floor-crossing to become an ANC-aligned independent and reconstituted the council under ANC control.

Cole formed a broad-based coalition of the ANC and DA after the March 2006 local government elections when neither party had obtained an outright majority.

After Cole resigned in December 2006 to pursue another career, Doris Wakeford-Brown of the DA formed a multi-party coalition.

This short-lived coalition collapsed in May 2007 when the Knysna Civic Alliance switched allegiances to the ANC, which brought Eleanore Bouw-Spies in as the new mayor.

In the 2016 election the DA fell short of an absolute majority, but formed a coalition with the ACDP and an independent councillor.