The town is nestled in the Bungala River valley, overlooked by the southern Mount Lofty Ranges and acts as a service centre for the surrounding agricultural district.

In the early stages of the colonisation of the state, Yankalilla was a highly important location, but its close proximity to Adelaide and the advent of fast transport has greatly diminished this position.

The origin of the town's name is unclear, but it is known that Governor Hindmarsh recorded the Kaurna pronunciation of "Yoongalilla", as applied to the District and noted this in dispatches of 1837.

[6] In 2002, Kaurna scholar Georgina Yambo Williams, in a paper co-authored by University of Adelaide linguist Robert Amery, drew from her own knowledge and various literary sources from the period of British colonisation of South Australia.

This is considered by Yambo Williams to be in reference to the Dreaming story of Tjilbruke, who carried his dead nephew's disintegrating body from (what is now called) the Sturt River (Warriparinga[7]) to Yankalilla and then collapsed.

[14] Aboriginal mythology credits the formation of the land forms of the Fleurieu Peninsula to the travels of Tjilbruke, the Kaurna ancestor creator as he grieved carrying the body of his nephew from the Sturt River to Cape Jervis.

[15] The Yankalilla district has European history dating back to the first settlement in South Australia, with coastal areas colonised in the late 1830s.

The actual town of Yankalilla was established in 1839 when The Reverend Father Henry Kemmis, came to live on land allocated to him be his cousin Governor George Grey.

His wife died shortly after they landed in Adelaide, his children were left with servants, who built their home, the Reverend remarried and later travelled throughout Australia, establishing schools.

The district council was officially proclaimed in 1854 and by the late 1860s the Yankalilla and Normanville had three flour mills, five stores, two breweries, four blacksmiths, three hotels and five churches.

It was interpreted as an image of the Virgin Mary, depicting her face and body and appearing to be holding the crucified Christ in the manner of a pietà.

Two years after the image appeared on the wall the local press covered the story in the Adelaide Advertiser, bringing international tourists to the town.

[19] Yankalilla lies inland on the Fleurieu Peninsula, a small protruding stretch of land south of the Adelaide Plains.

[citation needed] It is situated in the valley carved by the Bungala River, which meets the sea at the coast not far from the town, at nearby Normanville.

The youngest rocks in the region are in deposits laid down during the Cambrian period (600 to 500 million years ago) when fossils first appeared in the record.

[22] Since the town has no weather station, climate data was sourced from Parawa, a small settlement 11 kilometres (6.8 mi) south of Yankalilla.