Th first European to visit the area was Surveyor General John Septimus Roe who passed through in 1848. He recorded the name "Carlgarin" as the name of a nearby hill. Karlgarin is an Aboriginal word that is thought to mean "place of fire". Karlgarin was selected as a soldier settlement site and a declaration of a townsite was sought in 1924. OIt was not until the railway came to the area in 1930. The townsite was gazetted in 1931.
The town has a school, shop, telephone box, an abandoned church and grain receival point complete with a railway siding. Karlgarin is home to the annual yabbie races and is often considered ' the gateway to Pingaring '. The town's proximity to Hyden, along with its location on the Brookton Highway, means reliable tourism potential which the town is yet to capitalise on.