To the south of the town lies one of the many peaks that formed part of the volcano: Saddle Hill, a prominent landmark, visible from a considerable distance and notable for its distinctive shape, lies south of State Highway One where Kinmont Park, a new housing subdivision is located at the foot of the hill.

The site of Mosgiel figures in Māori legend, but surrounding features of the Taieri Plain and adjacent hills have older mythical associations.

Maungatua, the large hill to the west of the plain, represents a huge wave which struck the Takitimu, throwing overboard Aonui, who became a pillar on the Tokomairaro Beach.

Another account makes Aonui a female survivor of the wreck of the Ārai Te Uru, built by Kahui Tipua, who had arrived earlier but sent this vessel to the Polynesian homeland Hawaiki to get kūmara.

On its return the canoe suffered shipwreck at Shag Point in North Otago, but its survivors quested about the land in search of supplies.

This story has associations with Kāti Māmoe, ('Ngāti Mamoe' in modern standard Māori) of the late 17th or early 18th century.

He also climbed the westward hills and saw the raised land beyond, the nearest approach of the Central Otago plateau to the sea, which he correctly identified as potentially fine pastoral country.

Following the arrival of the Association's settlers at Dunedin in 1848, a Scots shepherd, Jaffray, brought his wife and dogs along the Māori track from Kaikorai Valley and settled on Saddle Hill in a whare (a Māori-style house) in 1849, establishing the first European farmstead in the district.

The richness of the land and the proximity of the main south road, more or less following the route of an old Māori track, led to early close rural settlement.

Arthur John Burns's establishment of the Mosgiel Woollen Company and mill in 1871 brought the settlement of workers in cottages.

The surrounding plain became a sort of Home County to Dunedin, a place of prosperous farms and of the large houses of successful businessmen with rural tastes.

From 1900 to 1997, Mosgiel was the site of Holy Cross College, the national Roman Catholic seminary for the training of priests.

After the Second World War, some expected Mosgiel might industrialise extensively, like the Hutt Valley, but expansion remained limited.

The late 20th century's increasingly ageing New Zealand population saw the expansion of housing for the elderly, with several retirement villages and communities located in the vicinity.

The 2003 completion of the Fairfield bypass shortened commuting-time via the southern motorway (part of State Highway 1) to the city centre.

[15] In 1936, while still a schoolboy, the artist Colin McCahon took part in a family outing, driving from the seaboard over the coastal hills.

Looking across the Taieri Plain towards Central Otago he had what he described as a "vision", seeing a pre-Biblical "landscape of splendour order and peace" – which, he said, it became his life's work to communicate.

In 1953 the young Ralph Hotere, later to become one of New Zealand's best-regarded artists, qualified as a pilot on Tiger Moths at the Taieri Aerodrome Training School, Mosgiel.

Mosgiel has recently[update] seen the opening or refurbishment of cafés and bars aimed at a younger market, and workers have built stages one and two of a planned larger playground.