Oban was established in 1794 and is one of the oldest surviving whisky distilleries. Its founders were local gentry John Stevenson and Hugh Stevenson, who, since 1778, had been operating in Oban and its surrounding areas, engaging in slate quarrying, house building, and shipbuilding. The town of Oban was built around the distillery, which is nestled between the town's main street and a towering cliff. The brothers initially established the site as a brewery in 1793, trading under the name Oban Brewery Company. The distillery was managed by the Stevenson family until 1866. After changing hands, it was purchased by J. Walter Higgin in 1883, who modernized and refurbished the facility. Three years before his acquisition, the West Highland railway line connecting Oban and Glasgow had opened. The town became a tourist destination, and Higgin could transport his whisky directly to the Glasgow market by rail. In 1898, the distillery was acquired by a syndicate led by industry notable Alexander Edward (see "Aultmore"), supported by Buchanan's, Dewar's, and Mackie's (White Horse). In 1923, Buchanan-Dewar took over Oban distillery, subsequently joining D.C.L. in 1925. The distillery's output was selected by U.D. in 1988 to represent the West Highland style in its "Classic Malts" series.

The distillery manager's office is located in a building that was once the residence of the Stevens brothers, Oban's founders. When Alfred Barnard visited in 1885, it had already been converted to offices by J. Higgin, but the front hall's door with its peephole was retained—the Stevens brothers had installed it to closely monitor the stillhouse operations. In 2015, Oban Little Bay was added to the core range; 'Oban' means 'little bay' in Gaelic.