Founded on the Gove Peninsula in north-east Arnhem Land when a bauxite mine and deep water port were established in the late 1960s, the town's economy largely revolved around its alumina refinery until it closed in May 2014.

Matthew Flinders, in his circumnavigation of Australia in 1803, met the Macassan trading fleet near present-day Nhulunbuy, an encounter that led to the establishment of settlements on Melville Island and the Cobourg Peninsula.

Permits are required to drive to Nhulunbuy — over 700 km (430 mi) of unsealed roads — so most supplies and visitors are brought by air to Gove Airport or by sea.

[12] On 29 November 2013, Rio Tinto announced the closure of the alumina refinery (but not the bauxite mine) by July 2014 with the loss of 1,100 jobs, or almost 25% of the town's population.

[14] Nhulunbuy's population had already dropped by mid 2014, with some of the workforce retained to monitor the shutdown and survey holding ponds full of toxic compounds, but most will be gone by January 2015.

[2] A range of measures were announced to support the town and its former workers through the closure and the following three years, but locals anticipate further cuts to services since the school, hospital, power plant and flights were backed by Rio Tinto.

[16] As a result of the refinery curtailment and subsequent loss of advertising revenue, Gove's only source of local news, the Arafura Times, published its final issue in mid-October 2016.

Local businesses provided A$10,000 of funding to the low-budget film, which showcases the area and characters, "and captures the ethos of the East Arnhem region: Indigenous and non-Indigenous people (Yolngu and balanda) working together to create something new".