Naracoorte area was settled in 1842 by the pioneer squatter George Ormerod. Two years later in 1845 William MacIntosh, a prosperous Scot who owned most of the land around the site of the present township, decided to establish a township. He named the town Kincraig after his birthplace in Scotland and duly built a hotel and a store hoping to attract settlers to the town.
Located in McDonnell Street in an old flour mill, The Sheep's Back Wool Museum and Tourist Office is an ideal starting point for visitors to the area. There is a gift shop and gallery as well as The Sheep's Back Wool Museum which is a history of wool and sheep (particularly in the local area) which is spread over four floors of the old flour mill. It is comprehensive and fascinating and has several 'Best Small Museum' awards. The mill was built in 1870, powered by water from the nearby creek, and continued to operate until the 1930s.
Naracoorte has a particularly lovely swimming lake which lies to the north of the town (take Moore Street north off MacDonnell Street). It is an ideal picnic location (complete with barbecue facilities and a new children's playground) and is adjacent to the Jubilee Park, 28 hectares of scrubland which was opened in 1986, which offers the visitor an opportunity to walk to an area characterised by rich displays of native fauna and flora.