Originally established after the 1849 California Gold Rush as a mining camp, the town was first called Mountain View.

[6] A post office opened in 1857, which was shared with the adjacent settlement of Mill City; the two eventually united.

On April 12, 1859, at the Willard Claim, a hydraulic mine in the Feather River Canyon northeast of the town, a 54-pound (20 kg) gold nugget was discovered, the largest in the world at the time.

[8] The community suffered extensive damage in the Camp Fire, a wildfire which began on November 8, 2018.

[9] As of December 13, Butte County Sheriff's Department reported that at least seven people died in Magalia during the Camp Fire.

[11] According to the United States Census Bureau, the CDP has a total area of 14.1 square miles (37 km2), all of it land.

There are numerous flora and fauna species found in the vicinity including mammals such as Black tailed deer, raccoon, and grey squirrel.

A considerable number of amphibians are also found such as the Rough-skinned Newt, whose southern range in the California interior occurs near Magalia.

[12] The soil, deep reddish-brown loam for the most part, supports forest dominated by tall incense cedar and bull pine.