Muskoka District was established in 1868. "Establishment of the Territorial District of Muskoka was the direct result of the passing of the Free Grants and Homestead Act, assented to during the first session of the Ontario Legislature on Feb 28th, 1868."²

"Algonquin Indians were the first recorded inhabitants of what is now known as Muskoka. They were nomadic, trading meat and furs with the Hurons for agricultural products. In 1649 the Hurons were annihilated by the Iroquois; gradually the Algonquins moved southward and by 1763 when the British took over, an Ojibway band was located in the Muskoka District. A treaty made in 1850 with the Ojibway ceded an ill-defined area in Muskoka to the Crown."²

It was first thought that the area should be an Indian reserve, but "in 1859 R.J. Oliver was appointed land agent and applications for settlement at Severn Bridge were received and 17 location tickets were issued for land adjoining the road."²

Although Muskoka District was established in 1868 it wasn't officially recognized until 1888. Until then several townships that are now in Muskoka District can be found in the adjoining counties of Victoria and Simcoe.

The first townships to be opened for settlement were Draper, Macauley, Morrison and Muskoka in 1861. The remaining townships were surveyed for future settlement. In 1868 Brunel, Cardwell, Draper, Humphrey, McLean, Stephenson, and Watt were opened for settlement.

When first settled the townships of Ryde, Draper, Macaulay, Stephenson, Oakley, McLean, Brunel, Chaffey, Ridout, Franklin and Sinclair, and the towns of Bracebridge and Huntsville were in Victoria County. Gravenhurst was in Simcoe County.