The council was established by the District Councils Act 1887 on 5 January 1888. The bounds were defined in the act as "All that portion of the County of Robinson not included in the district of Elliston."[5] This meant that the Hundred of Downer, Hundred of Wallis, a large part of Hundred of Wright south of Venus Bay, and an unincorporated area approximately 100 square miles between the three (proposed to be Hundred of McBeath but never gazetted) within Robinson county were excluded from Streaky Bay council and proclaimed as part of Elliston council instead.
It was, until the creation of the neighbouring District Council of Murat Bay (now Ceduna) in 1925, the farthest outpost of local government in South Australia. In the same year, the District Council of Wudinna was established to the east, annexing the hundreds of Condada, Moorkitabie, Carina, Addison and Travers (about 549 sq mi (1,420 km2)) from Streaky Bay council to form the north western flank of the new council.
While the town of Streaky Bay was named Flinders until 1940, the municipality has been titled Streaky Bay since its inception. In 1936, it was the largest local government area in South Australia, covering 6,532.6 square kilometres (1,614,240 acres).[6][7]