The town name is thought to be derived from "Ngumundi" or "Huomundy". This is the name of a local Aboriginal warrior said to have adopted escaped convict Bracefield as his son in 1831.
From the early 1850s, most of the area around the Eumundi district was part of three cattle runs: Canando, Yandina and North Kenilworth. In 1867, after the discovery of gold at Gympie, the first road was marked and cleared. By 1879, George Gridley became the first selector to reside permanently in the Eumundi district. This started a wave of new selectors and by 1885, 47 selections were taken up. Some of the pioneers settlers included Fullager, Cowell, Burrel, Ball and Arrundell.
In 1882, Fullager selected Portion 110. This was forfeited and the Crown took over, surveying this portion for streets and the sale of blocks of land. Thus, emerged the town of Eumundi. At the turn of the century, shops started to line the newly formed streets and town businesses developed. By the end of the decade there were several general stores, butcher shops, bakery, saddler, blacksmith and auctioneers. After the railway opened from Yandina to Cooroy in 1891 along with the road to the north passing through the town, Eumundi developed as an important centre of the timber and dairying industry.
The surrounding country consisted of dense scrub full of pine, beech and cedar and long ridges covered with tallowood and blackbutt. George Etheridge, in 1895, moved his sawmill from Petrie's Creek (Nambour) to Main Camp and in 1900 moved it once again to Eumundi. It functioned here until 1938. In 1922, a second sawmill was brought in from Verrierdale. The two mills operated amicably as one specialised in hardwood and the other processed softwood timber.
As the land was cleared and grasses were planted, dairy farms began to build up over the area. By 1920, two butter factories had been built in the area.