The town's name comes from the Worsley River, a tributary of the Collie River, that is located nearby. The origin of the name is thought to be from the Worsley side of the Clifton family. The name was first recorded in surveys performed in the area in 1845.
In the 1890s a railway siding was constructed in the area to service the timber industry, and later in 1906 the state government decided to create a town-site in the area. Lots were surveyed in 1907 and the town was gazetted in 1909. The town peaked in 1902 when its population was in excess of 1,500 people but it began to decline in the 1920s and saw the town all but disappear by the 1950s. In 1984 construction of the Worsley Alumina refinery began and the area experienced an unexpected revival.
The name Worsley is also used for the bauxite refinery facility operated by BHP Billiton that is close to the town. One of its most interesting features is a 52 km conveyor belt that carries the bauxite from its mine, north of the refinery, to it. It is believed to be one of the longest conveyor belts in the world.