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The meaning of Katanning is unknown but it is thought to be a local aboriginal word that is either 'Kart-annin' that literally means "meeting place of the heads of tribes", or 'Kartanup' that means "clear pool of sweet water". Others suggest that the place is named after a local aboriginal woman.


The first Europeans to explore the Katanning area were Governor James Stirling and Surveyor General John Septimus Roe who travelled through the area in 1835 en route from Perth to Albany.


In about 1870, sandalwood cutters moved into the area but they did not settle. It was not until the arrival of the Great Southern Railway from Perth to Albany in 1889 that the township came into existence.