The area now known as American River was first visited by Europeans in 1802 when Matthew Flinders landed to survey this part of Kangaroo Island. In 1803, a group of American sealers camped for four months in the area. They arrived on the brig Union and built their own 35 ton schooner Independence from local timber. The town takes its name from this time. A memorial plaque and accompanying anchor (recovered in 1969) from an early American whaling vessel is dedicated to the crew of the Union.
Frank Potts was the first official settler in 1842, before moving to the mainland and establishing theBleasdale vineyard and winery at Langhorne Creek.n John Buick, a professional boat builder, built the first house in the town in 1844. It was fashioned out of local stone, pug and split timber and remained standing until 1985.
Somewhat erroneously, the waters of Eastern Cove, upon which the township is located, have been referred to as American River, compounding the illusion that the township is connected in any way with a river