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The original inhabitants of the land were Aborigines of the Gumbaynggirr clan. The Aboriginal name for the land where the town now stands was Bongil Bongil.
In 1863 a cutter carrying a load of cedar logs ran aground on what would become Sawtell Beach. A Coffs Harbour farmer named Walter Harvey assembled a team of workers to salvage the logs, and a small settlement developed near the site of the wreck.
Forty years later, the land around Sawtell Beach was purchased and subdivided by Oswald Sawtell for housing and farmland. A railway station, post office, school and hotel followed soon thereafter and by the 1930s Sawtell had become a thriving coastal village.
As of 2006, the population of Sawtell was 3,122.