This isolated lowland, 96 km north of Westport, has a pleasant climate, with warmer temperatures and less rain than the rest of the region. Little gold was found in the area in 1860s, and so it remained largely uninhabited, despite a navigable port at the mouth of the Karamea River. In the early 1870s the Nelson provincial government took advantage of a government-funded scheme to develop a special settlement at Karamea. Most of the immigrants came from England, with a group from the Shetland Islands (north of Scotland). Land transport out of the district was difficult in the early days. The present route over Karamea Bluffs to Westport was not opened until 1916. After the 1929 Murchison earthquake the port at the mouth of the Karamea River silted up, and the only access to the area was then by road.

Meaning of place name
The name Karamea is used for both the township and the whole area. It is a contraction of Kakara-taramea, meaning sweet-scented gum, which was made locally from the leaves of speargrass.

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