Following its foundation in 1848 the Province of Otago as established in 1853 occupied the southern third of the South Island. Its northern boundary was defined by the course of the Waitaki River from the sea to its source; thence it ran in a straight line to the Tasman Sea at Awarua Bay. As the interior of the South Island was unexplored in 1853, confusion later arose as to which of several branches of the Waitaki River constituted the boundary. After some years of dispute between the Otago and Canterbury Provincial Governments, the central portion of the boundary was defined in 1861 as running along the Ohau River to Lake Ohau and thence by a straight line to Mount Aspiring and Awarua Bay.

In 1861 separatist agitation from the predominantly pastoral settlers in the southern district of Murihiku resulted in the proclamation of the Province of Southland. The new province was bounded in the east by the Mataura River, in the west by the Waiau River, and in the north by a line from Eyre Peak to Lake Manapouri. Stewart Island was added to Southland in 1863 after its purchase from the Maoris by the Central Government. The delights of independence soon faded when the new province accumulated a heavy burden of debt. By the late 1860s most Southlanders were ready for amalgamation with prosperous Otago and reunion was achieved in 1870.

The southern and eastern coastline from the Waitaki River to Te Waewae Bay on the fringes of Fiordland has a record of long, if sparse, Polynesian settlement. Archaeological study of several moahunter camp sites suggest occupation as early as A.D. 1000. Permanent settlement seems to have been restricted to the cloudy and forest-fringed coastline with its resources of fish and bird life. But there is abundant evidence that in drier inland areas purposeful or accidental fires lit by early man destroyed much of the forest cover and extended the area of tussock grassland. There is no record of Maori agriculture in Otago in pre-European times, and in the 1830s the native population south of the Waitaki River was probably not more than 1,000.

European activity began about 1800, when parties from small schooners based on Hobart and Sydney plundered the coasts for seal skins. In 1829 the first shore whaling station was established at Preservation Inlet in Fiordland and in the 1830s at least 12 others were established by New South Wales merchants between Jacobs River (Riverton) and Moeraki. During this same period Otago Harbour and Paterson Inlet in Stewart Island served as temporary bases for the deep-sea whaling ships of many nationalities. Shore-based whaling was a speculative industry, doomed by 1843 because of its own excesses, and the whalers who remained turned increasingly to cultivation and livestock rearing. The most enterprising pioneer in this respect was Sydney-born John Jones who, in 1839, employed 280 men at his seven Otago whaling stations. In 1840 he brought 10 families to farm at the Waikouaiti whaling station and in the next few years his farm developed in such a flourishing condition that it could supply the Scottish immigrants with essential foodstuffs when they landed at Otago Harbour in the autumn of 1848.