Bandon was founded by the Irish peer George Bennett in 1873. George Bennett, his sons Joseph and George, and George Sealey came from Bandon, Ireland. The following year the town's previous name of Averille was changed to Bandon after the town of the same name in Ireland. The next year, Joseph Williams and his three sons arrived, also from Bandon, Ireland. In 1877, the post office was established. In 1880, cheese making began. That same year, Congress appropriated money to build the jetty. In 1883, the first sawmill, school house, and Catholic church were built. In 1884, the U.S. Army Corps of Engineers began construction on the jetty.
George Bennett also introduced gorse (Ulex europaeus) into the local area, which in the following decades went wild and became a nuisance in both the town and in the neighboring countryside. Gorse, a spiny plant, grows so thickly a person can't walk through it. It's a very oily plant. If a fire strikes, the gorse flares up quickly.
Cranberries have been grown in Oregon since 1885, when Charles McFarlin planted vines he brought from Massachusetts. He had originally come to pan for gold in California. He didn't make his fortune, or even a living, so he turned to what he knew best. He brought vines from Cape Cod and planted them in the state's first cranberry bog near Hauser. This bog produced cranberries for eight decades. His variety adapted to growing conditions on the west coast. The variety was named McFarlin in his honor and is still the principal variety grown on the west coast. .
On September 26, 1936, embers blown from a nearby slash fire of a logging crew inflamed gorse growing inside Bandon, and ignited a fire inside the city, causing massive destruction. Bandon's entire commercial district was destroyed. The total loss stated at the time was three million dollars, with 11 fatalities. Stewart Holbrook vividly described this conflagration in his essay "The Gorse of Bandon".
Part of the commercial district had been erected on wooden pilings jutting out over the Coquille River not far from the South Jetty, accommodating river traffic at the merchants' doors. After the 1936 fire, when Bandon began to be rebuilt, the new perimeter of the business district did not extend beyond the available land.
According to the United States Census Bureau, the city has a total area of 3.1 square miles (8.0 km²), of which, 2.8 square miles (7.1 km²) of it is land and 0.3 square miles (0.9 km²) of it (10.97%) is water.
One popular tourist activity is storm watching.
There were 1,287 households out of which 21.2% had children under the age of 18 living with them, 43.4% were married couples living together, 10.1% had a female householder with no husband present, and 42.8% were non-families. 36.1% of all households were made up of individuals and 19.0% had someone living alone who was 65 years of age or older. The average household size was 2.09 and the average family size was 2.71.
In the city the population was spread out with 19.1% under the age of 18, 4.7% from 18 to 24, 19.4% from 25 to 44, 27.5% from 45 to 64, and 29.4% who were 65 years of age or older. The median age was 49 years. For every 100 females there were 82.4 males. For every 100 females age 18 and over, there were 80.0 males.
The median income for a household in the city was $29,492, and the median income for a family was $37,188. Males had a median income of $28,636 versus $22,722 for females. The per capita income for the city was $20,051. About 11.9% of families and 16.0% of the population were below the poverty line, including 34.1% of those under age 18 and 6.0% of those age 65 or over.