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The townsite of Dunsborough is located on the coast, 12 kilometres southeast of Cape Naturaliste and approximately 19 kilometres of Busselton. It was gazetted as a Townsite in 1879, but land for a townsite was set aside here in the late 1830's, and there is a recorded whale fishery at "Dunsbro" in 1850.

Dunsborough is located adjacent to Dunn Bay from which it derives its name. The bay is believed to have been named by Governor James Stirling , March 1830, whilst on the "Eagle" carrying out a survey of Geographe Bay. It is named after Captain Richard Dalling Dunn, under whom Stirling served on the "Hibernia"120 and the "Armide"38 in 1810-1811 (Stirling named a number of features in Western Australia after naval officers under whom he served or was associated with) When Dunsborough first appeared on a map in 1839 it was spelt "Dunnsbro" but the extra n appears to have disappeared by 1850, and the spelling of "bro" was amended to "borough"when the name was gazetted in 1879.