Southland was a scene of early extended contact between Europeans and Maori, notably whalers and missionaries – Wohlers at Ruapuke. In 1853, Walter Mantell purchased Murihiku from local Maori iwi, claiming the land for European settlement. Otago, of which Southland was itself part, was the subject of planned settlement by the Free Church, an offshoot of the Presbyterian Church of Scotland. Settlement broadened with the discovery of gold in Central Otago in the 1860s. Today, traces of Scottish speech persist in Southland voices, with R often pronounced with a rolling burr. This is more noticeable among country people.
In 1856, a petition was put forward to Thomas Gore Browne, the Governor of New Zealand, for a port at Bluff. Due to the Otago gold rush, the region's population grew during the 1860s with the settlement of Bluff. Browne agreed to the petition and gave the name Invercargill to the settlement north of the port. Inver comes from the Scottish Gaelic word inbhir meaning a river's mouth and Cargill is in honour of Captain William Cargill, who was at the time the Superintendent of Otago, of which Southland was then a part. The settlement's chief surveyor was John Turnbull Thomson, a British civil engineer.
Under the influence of James Menzies, Southland Province (a small part of the present Region, centred on Invercargill) seceded from Otago in 1861 following the escalation of political tensions. However, rising debt forced Southland to rejoin Otago in 1870 and the provincial system, and with it the province of Otago, was abolished entirely in 1876. This debt was caused by a population decline stemming from poor returns from pastoral farming. In 1874, Invercargill's population was less than 2,500 which reflected the drift north to large centres. In the 1880s, the development of an export industry based on butter and cheese encouraged the growth of dairy farming in Southland. In December 1905, Invercargill voted in local prohibition of alcohol sales. This lasted for 40 years until voted out by returning servicemen in the Second World War. Drinking continued meanwhile, thanks to hotels and liquor merchants in outlying districts, huge volumes of beer, often in kegs, brought to private homes, or sold by the glass by keggers at hiding spots round the City.
When prohibition ended, a committee of citizens persuaded the Government to give the monopoly on liquor sales in Invercargill to the specially formed Invercargill Licensing Trust. Based on a scheme in Carlisle, England, it returns profits to city amenities. Even today, alcohol is not sold in supermarkets.
In recent years, publicity has been brought to the southern city by the election of Tim Shadbolt, a colourful and outspoken former student activist and former mayor of Waitemata City, as mayor. He once appeared on a cheese advertisement stating "I don't mind where, as long as I'm Mayor". His supporters like the colour he brings to the city. His opponents refer to his controversial mayoral career in the Auckland suburbs and to his attitude to veterans during his opposition to the Vietnam War.
Publicity and students have also come to the city by the Southern Institute of Technology's "Zero Fees" scheme, which allows New Zealand citizens and permanent residents to study while only paying for material costs of their study, and not tuition fees.