Melmoth was established as a magisterial office in the time of the British annexation of Zululand in 1887. It was named after Sir Melmoth Osborne, resident-commissioner and chief magistrate of the region. Horticulturists discovered that the mountains around the town were ideal for the planting of wattle plantations and in 1926 a factory was built to process the wattle bark. The economy of the town is still dependent on wattle and pine plantations.