Stone Hut was named after the old stone cottage built in the 1850s on the banks of the Rocky River for Frederick White and his bride. It still survives as a relic of the mail coach days, when it was also a stopping place for teamsters busily carting wood from the forest to the mines in Burra.

The town was surveyed in 1874 and trade expanded the little settlement. Coach passengers would have stayed at the Royal Mail Hotel on the main road but this has since been demolished, as have many of the larger original buildings.

With the advent of the railway line in 1910 Stone Hut became a major marshalling area for grain which was trans-shipped from the Stone Hut siding. The town became a home for railway workers although it was never known as a railway town. The railway closed in 1986.

The community slowly declined after the first 20 years due no doubt to the  droughts of that decade, acces by rail to larger trading centres and later the ravages of World War 1 on the male population.

In 1926 the residents raised money for the erection of a building as a memorial to the soldiers of World War 1. This became known as the Stone Hut Soldiers Memorial Hall and it is still used today for social events and markets.