The name "Narrawallee" is taken from the creek which flows eastwards from Milton and its estuary on the Tasman Sea and is itself a corruption of the Aboriginal words Nurrawerree or Narra Warra.

European activity in Narrawallee began in 1924 when a 610 mm (24 in) gauge tramway was constructed to transport silica from deposits near Conjola to a jetty at Bannister Head.

[6] Popular due to its coastal setting, development in the modern village of Narrawallee began in the 1960s and 70s[7] and is made up of a mix of permanent residences, holiday rentals and weekenders.

[8] A boat ramp at Narrawallee Inlet allows small vessels to be launched depending on tides and public restrooms, picnic and barbecue areas are also provided.

The reserve provides opportunities for activities such as bush walking and fishing, as well as recreational water sports and is popular with families as the estuary is protected from the rough surf.