Bonagee United were formed on 2 November, 1970 in the Continental Bar, now Voodoo, on Letterkenny's Main Street. In 1971, the club purchased 1 hectare (2.5 acres) of land behind the Dry Arch for £1000. They were originally called Arcade Athletic. In 1973, Athletic became Bonagee Celtic and then in 1975 Bonagee United. A development programme was drawn up in 1988 and gave the club an all-weather playing pitch and a spectator stand. A general purpose hall, two astroturf pitches with floodlights, extra dressing rooms, a store and office have also been added. Today the facilities amount to €973,000, for which they received a grant of €360,000. Money was raised by generous locals and the then Minister for Sport, Jim McDaid.
Michael Funston, who came through the youth ranks of Bonagee United, currently plays for Finn Harps.