The Aboriginal Australians living in the area when Europeans arrived were the Bindjali people,[12] although this meaning has also been ascribed to Coonawarra by the same source.

A different source reports that the Bindjali expression, pena oorla means "wooden house", which referred to the first pub in the district, the Royal Oak.

In April 1850, Cameron obtained 80 acres (0.3 km2) of freehold land (his station was on a pastoral lease) and established the private town of "Panoola", later known as Penola.

[citation needed] Mary McKillop was a Roman Catholic nun, who was beatified on 19 January 1995 at Randwick Racecourse, Sydney, in a Mass celebrated by Pope John Paul II; and became the first Australian to be named as a saint in 2010.

[24] Penola has a number of heritage-listed sites, including: In 2010, a strong tornado ripped through the township destroying at least four buildings and damaging many more.

It is in close proximity to the two State Heritage sites of Petticoat Lane and the original stone schoolhouse developed by Mary MacKillop in conjunction with Father Julian Tenison Woods in the 1800s.

Penola is located within the federal division of Barker, the state electoral district of MacKillop, and the local government area of the Wattle Range Council.