Two years after the first European settlers established high country farms in the Wakatipu area, gold was discovered nearby.The find was concealed for a short time, but news soon spread. In 1862 Jack Tewa, a shearer working for William Rees, had found gold in the Arrow River.

Originally named Fox's (after William Fox, a Californian gold miner) the town began to populate. Within weeks 1500 people, and as the news of gold in the Arrow River spread, people in search of the alluvial treasure arrived in droves. Tents and shanties built on the river bank were washed away in a spring flood the following year, lives were lost. The town was re built more solidly on the terraces above the river bank.

Arrowtown developed from a canvas town to a solid community, which included several hotels, a Bank, Post Office, Gaol, School, and Hospital. At the height of the gold rush, Arrowtown's population grew to over 7000.

The bustling town soon became the hub of a larger community including the new towns Macetown, Skippers and Bullendale (now ghost towns).

Today Arrowtown remains a treasure in it's own right, retaining an ambience sought after by visitors and residents alike.

Arrowtown's more modest population of 1,689 (2001 census) and a wider area population of 17,000 enjoy excellent educational facilities, and a range of quality amenities including, library, museum, swimming pool, internationally acclaimed golf courses, medical centre, nearby an airport, hospital, ski fields, an ice rink, sports and events centre.

With the gold rush long over, Arrowtown's focus is on hosting visiting holidaymakers, in accommodation, dining and sightseeing and recreational persuits. Film production, viticulture and farming are also major income earners for the town.