Queenstown's history has long been tied to the mining industry. This mountainous area was first explored in 1862. It was long after that when alluvial gold was discovered at Mount Lyell, prompting the formation of the Mount Lyell Gold Mining Company in 1881. In 1892, the mine began searching for copper. The final name of the Mount Lyell company was the Mount Lyell Mining and Railway Company.
Queenstown Post Office opened on 21 November 1896. A Queenstown South office opened in 1949 and closed in 1973.
In the 1900s, Queenstown was the centre of the Mount Lyell mining district and had numerous smelting works, brick-works, and sawmills. The area at the time was finely wooded. The population in 1900 was 5051; the district, 10,451.
The town was the base of the Queenstown council up until amalgamation with other west coast councils in the 1990s. The town in its heyday had a collection of hotels, churches and schools that have all significantly reduced since the demise of the Mount Lyell company.
The town was the base of the Organisation for Tasmanian Development started in 1982.
There was a brief boom in prosperity in the 1980s, with the building of several nearby dams by the Hydro. The Darwin and Crotty dams that comprise Lake Burbury (a popular fishing a recreation venue) were built during this period. These followed the cancellation of the Gordon-below-Franklin Dam in 1983 after strong campaigning by environmentalists in the 'No Dams' campaign.