Oak Flats was originally a grant of 1,200 acres known as the Oak Flats Run, to Army Officer John Horsley in 1821.

In 1925, the first Oak Flats sub-division, the Lake Illawarra Township Estate began to develop. Timber was cleared and sold for pit props and firewood. In these early years Oak Flats was a haven for tourists especially those from Sydney and the Blue Mountains. The charm of the seaside village, beauty of the Macquarie Valley and the peaceful shores of Lake Illawarra saw tourists flock to Shellharbour in the 1920s.

During the Depression, land sales were slow, and out of work men ‘squatted’ with their families in tents and rough dwellings constructed of fruit boxes, nailed together and covered with hessian and a thin coating of sand and cement.

Development of Oak Flats started to move in 1947 after WWII when the town became a source of affordable housing for migrants displaced by the war in Europe. These new residents were mainly from Holland, Germany and Finland.