The present Shire of Mukinbudin was settled by pastoralists who in the 1870s took up large leases in excess of 20,000 acres (81 km2) to run sheep and by sandalwood cutters and miners en route to the goldfields. In 1910 the first of the farmers arrived to commence wheat growing on their 1,000-acre (4 km2) blocks and it was some time before they added stock to what had been entirely a wheat growing enterprise. An extension of the Mount Marshall railway line to Mukinbudin and Lake Brown was approved in 1922 and opened in October 1923. The town site was gazetted in 1922.
The town was hit by a wild storm in February 2011 and was lashed by strong winds with gusts over 125 km/h, large hailstones and experienced some flooding. Dozens of power poles and hundreds of trees were blown over and parts of roads were washed away.