Ranfurly lies near the middle of the Maniototo Plain, with Naseby and Ida Range to the north, the Kakanui Mountains to the east, and Rough Ridge to the west. The town and nearby Naseby started with the discovery of gold on the northwest end of the Kakanui Mountains and south of the Ida Range in the 1860s. This was part of the gold fever that gripped Otago after gold was discovered at Gabriels Gully near Lawrence. The gold ran out relatively quickly, and Ranfurly became a rural service centre.

In the 1890s, it gained a clear advantage over Naseby when it was selected as the route for the Central Otago Railway line between Dunedin and Clyde. The town's original name was “Eweburn”, but it was changed to Ranfurly to honour the Earl of Ranfurly, Governor General of New Zealand, when the railway line reached the town in the late 1800s.

In the 1930s, a modest building boom resulted in several Art Deco buildings. More recently, the town has become a popular tourist stop. it is near the intersection of State Highway 85 and 87 and on the Central Otago Rail Trail between Clyde and Middlemarch. The rail trail was established after the railway was shut down in the late 1980s, and the old railway station is now an attractive visitor centre.

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