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Denham is a townsite located in Shark Bay 831 kilometres north north-east of Perth. The townsite was gazetted in 1898, and at that time was locally known as "Freshwater Camp". The government surveyor who surveyed the townsite, C M Denny, chose the name Denham for the townsite, deriving the name from the adjacent Denham Sound. The Sound in turn is named after Captain Henry Mangles Denham, a Royal Navy Hydrographer who surveyed a portion of Shark Bay in the HMS Herald in 1858.

The site chosen for this townsite was the only location in Shark Bay providing a good supply of fresh water. The local population at that time was principally engaged in pearling, and many opposed declaring a townsite, because of the process used to obtain the pearls and pearl shell. The pearlers used "shell pits" and "pogey tubs" in which they deposited the dead pearl shell fish, allowing it to come to a state of putrescence before boiling down. This enabled them to collect the pearls that were not visible when the pearl shells were opened on the beach. They believed the smell of their industry would force them to move away from the townsite where health laws would now apply.