The surrounding area is the Margaret River Wine Region and has become known for its wine production and tourism, attracting an estimated 500,000 visitors annually. In earlier days the area was better known for hardwood timber and agricultural production.
After World War I, an attempt by the Government of Western Australia to attract migrants to Western Australia (known as Group Settlement) and establish farms in the region attracted settlers to the town. In 1922, over 100 settlers moved into the district.
The Margaret River Wine Region extends about 120 kilometres north-south from Cape Leeuwin to Cape Naturaliste and about 30 kilometres inland. High-quality table wine grapes have been grown by a variety of commercial vineyards since the first significant plantings at 'Vasse Felix' were established in 1967.
Vasse Felix was named after a French seaman by the name of Thomas Vasse. Vasse had drowned when his longboat overturned off Wonnerup Beach near Busselton while exploring the coastline in the Geographe under Nicholas Baudin in June 1801.
Other pioneering wine producers include 'Moss Wood', 'Cullen', 'Woodlands' and 'Cape Mentelle', all established in the early 1970s.
The shift in emphasis to the wine industry in the late 1980s-early 1990s sharply reversed the slow decline in the region's economy, and since 1996, the region has been one of the fastest growing economic areas in Australia. Wines from the region are exported throughout the world and some varietals have achieved considerable fame: the 'Leeuwin Estate' Art Series Chardonnay for example is one of the finest of this varietal in the world.
Although the region is one of Australia's largest wine regions, it produces just three percent of total Australian grape production, while producing more than 20 percent of the nation's premium wines.
In recent years a number of small, independent producers have appeared bearing contemporary labels and brands. Some of these include 'wine by brad', 'Flying Fish' and 'Preveli Wines'.
Several hundred caves are located near Margaret River, all of them within Leeuwin-Naturaliste National Park. Six of these are open to the public.
The most famous of these is the multi-chambered Mammoth Cave, which lies 21 kilometres south of the town and contains fossils dating back over 35,000 years. The cave was first discovered by European settlers in 1850 and has been open to the public since 1904. The cave can be explored by a self-guided audio tour, and is one of the few caves in Australia offering partial disabled access.
The other five caves open to the public in the area are Jewel Cave, Lake Cave, Ngilgi Cave, Calgardup Cave and Giants Cave. Many other caves can be accessed with a permit by experienced cavers.