In March 1791 Elizabeth Macarthur described her visit as an early tourist to what would later be called Watsons Bay: 'We passed the day in walking among the Rocks, and upon the sands very agreeable.'  There were no longer the Aboriginal people found there three years earlier, but she recorded the presence of 'a few huts' for the crew dispatched by the authorities to man a lookout post and flagpole at the adjacent South Head, to signal arriving ships. Fifty-six years later, in 1847, she was back in Watsons Bay, staying in one of the area's grand 'marine villas', Clovelly, where she eventually died. Clovelly was owned by her nephew Hannibal (and later by two state premiers). Around these fine houses were spread the homes of fishermen, tradesmen, pilots and their crews.
Watsons Bay is the settlement, village and suburb on the outermost shores of the southern side of Sydney harbour. The history of Watsons Bay represents the interactions and needs of four communities.  Government officials lived and worked here because of its proximity to Port Jackson and its entrance to the ocean. Others made Watsons Bay their home because of their work in or from the area – as fishermen, or pilots, or as traders in the community. The appeal of the location attracted the colonial gentry to establish grand houses in Watsons Bay, from the 1830s onwards. The largest group of all was visitors who came to Watsons Bay from the city of Sydney, from further afield in Australia and from abroad, attracted to its vistas over the harbour and ocean, its proximity to South Head, The Gap and Camp Cove – visitors whose presence stimulated facilities for their recreation and sustenance.
Watsons Bay was known as Kutti to the indigenous Cadigal people who fished and collected shellfish in the waters and bays off South Head.  They actively exploited resources from nearby Camp Cove and they carved rock engravings, which have since disappeared, along the coastline.
A lookout was established at outer South Head in 1790 to signal to ships the whereabouts of the settlement and harbour, and advise Sydney town of the imminent arrival of a vessel. The crew of the lookout – Midshipman Daniel Southwell and up to 11 men – had houses and even a garden, probably in the area now occupied by Robertson Park, which lies between Watsons Bay beach and The Gap. They lived in
whitewashed cottages, in a valley adjoining to the garden, and near the beach. … We have a rill of fresh water at a stone's throw on each hand. A boat is also allowed us, and we have good opportunities to try our luck at fishing. There are likewise musquets and ammunition for the defence of the place, and the situation, though so retired, has its advantages. 
Pilots and fishermen
In May 1792 a fishery was established here 'exclusively for the use of the sick' under a man named Barton, who was also to act as a pilot for ships.  While there were charts of Port Jackson to warn of its dangers, increased shipping caused demands for pilotage, and Watsons Bay has remained the base for pilots since that time.  Robert Watson, formerly quartermaster on the First Fleet's Sirius, was living near South Head, undertaking some piloting duties from at least 1809.  A 'Pilot's house' is shown in a watercolour from c1810,  and he was formally appointed in 1811 as pilot of Port Jackson.  Watson gave his name to the area – Governor Macquarie recorded a visit on 9 April 1811
to Camp Cove, now called Watsons Bay, where the native fig tree spreads its foliage into an agreeable alcove. 
Robert Watson became harbourmaster in 1813, and in 1818 became the first keeper of the Macquarie Lighthouse. The government allowed Robert Watson land on which he built a stone house, still standing to 1830,  but this was not a formal land grant of ownership.
From 1833 legislation required almost all vessels to use a pilot to enter or leave Port Jackson,  and competition between pilots began. Land grants were made in 1835 to pilots Thomas Watson and Richard Siddons (also called Siddins and Siddens), who had been living there since at least 1828, and who had individual responsibility for offering pilotage services. To reach arriving boats, pilots used open 'whaling' boats. In the 1841 census of Watsons Bay, while Richard Siddons was occupying a stone house as head of a household of 17, a 'tent' at Camp Cove was the home for George Bainbridge and seven others, six classified under 'Mahomedans and Pagans', who were probably Maori sailors who had left visiting shipping to work in the pilot boats.
By 1847 Portuguese sailors who had settled in Watsons Bay provided pilot services as well as being fishermen.  In 1860 the Government bought back land to build a pilot station, and the service has varied between public and private control from that time. In 1875 there were five pilots and a dedicated pilot vessel, the Thetis, available to shipping. The present pilot station was opened in 1959.
Watsons Bay was long a base for fishermen – in the first half of the twentieth century they would sell their catch from around the tree near the end of the Watsons Bay wharf.  Some, like several Portuguese and the African American 'Black Peter', had arrived in Sydney as crew of foreign vessels and decided to stay. The wharf has been a base for game fishermen, and host to famous visitors, including American writer Zane Grey in the 1930s.
Other government officials at Watsons Bay have included police, postal officials, military families and support staff for lighthouses and the signal station.
Land grants and settlement
The first government land grant, to Edward Laing in 1793, of the area behind Camp Cove (and later referred to as Roddam's Farm), was left unoccupied. Ownership changed several times until the land was subdivided into 141 lots and auctioned in 1855–56 for development, though some of the lots initially remained unsold.  From this sale, the larger part of the Watsons Bay village we know today took shape.
The land south of Laing's grant, to the east and south of Watsons Bay beach itself, apart from some government reserves, was gradually disposed of in land grants from the 1830s. Subsequent subdivision marked the development of the suburb and its extension to Vaucluse. 
Thomas Watson, master mariner and pilot, built a 'marine villa' on his 1834 land grant – the site of today's Robertson Park – but rented and then sold it to Hannibal Hawkins Macarthur from 1837–38. Macarthur named it Clovelly. In 1848 it was sold to Henry Watson Parker, son-in-law of John and Elizabeth Macarthur and future premier of New South Wales. From 1864 Clovelly was occupied (and later bought) by (Sir) John Robertson, several times premier of New South Wales. Clovelly fell into disrepair and was eventually demolished in 1903. The site and adjacent area were resumed by the government and became Robertson Park, which was mainly recreational, but in World War II contained an air raid shelter.
On Richard Siddons's grant, a substantial house was built from 1837, renamed Zandoliet or Zandvliet when bought by Colonial Treasurer Pieter Laurentz Campbell. In 1841 the estate of Campbell was subdivided into 17 lots for auction,  with unsold lots auctioned again in 1847:
admirably adapted for marine villa residences … occupies the most central spot in that far-famed picturesque part of Port Jackson Harbour.
With the establishment of pleasure steamers to Watsons Bay, the main house was redeveloped as the Marine Hotel (with a restaurant) in 1854–55. In 1859 new owner Henry Billing renamed it the Greenwich Pier Hotel – and it had its own adjacent wharf. More unusually, he created a private zoo for visitors. It included two lions and some zebras, said to have been put into harness. In time it was renamed the Royal Hotel, and an open air cinema operated behind the house. From 1924 it was used as the Town Hall for Vaucluse Council, until the council was abolished in 1948. It then took on its role as a wedding and reception centre, initially called Fisherman's Lodge and subsequently renamed Dunbar House.
The 1841 census records 13 households with 122 people in all. At outer South Head were two stone and two timber houses. At the Camp Cove area were two timber houses and a tented accommodation for the pilot boat crew. In Watsons Bay village itself were listed just six households: one timber house and five stone houses. A drawing in 1845 by George Angas, looking south from Camp Cove to Watsons Bay, shows about 13 houses with some additional hut outbuildings.  In 25 years from 1841 the population grew from 122 to a recorded population of 237.  As subdivisions continued and the number of houses grew, the size of most of those households decreased, so that the 2006 Census recorded just 691 residents of Watsons Bay in 241 occupied private dwellings.
The growth of civil government and military use, increasing residence and visitors had its impact on the landscape. Images of Watsons Bay, The Gap and South Head from the mid-nineteenth century onwards show barren, rocky, treeless wastes stretching between buildings, while livestock browsed. Today's rich natural vegetation and parks are the effort of recent decades and changed ownership of open spaces.
The class mix of Watsons Bay continued long into the twentieth century. Expensive modern houses, the equivalent of the nineteenth century 'marine villas', continued to be built alongside the small weatherboard cottages originally occupied by fishermen, government officials (including the military) and local traders. An artistic community was also drawn to this area. Famous residents included novelist Christina Stead who drew upon the area in her writings. Some families remained in Watsons Bay across several generations, but property prices and the high value of land in the area have led to a gradual and irreversible transition. The heritage value of Watsons Bay has been reflected in successive planning strategies adopted by Woollahra Municipal Council.
Watsons Bay in the nineteenth century was an hour by horse and carriage and half an hour by boat from Sydney. Even the growth of ferries and trams was focussed on the needs of tourists, not residents. Until the development of private car ownership, local shops therefore served the needs of the residents of Watsons Bay, and in the twentieth century those of the growing population of adjacent Vaucluse (whose population grew to 13 times that of Watsons Bay). At different times Watsons Bay had its own bakery, butchery, general store, haberdashery, barber, pharmacy, newsagent and fuel merchant, even a service station. There was a part-time post office from 1854 and a permanent building from 1889 to 1988.
Churches and schools
The church history of Watsons Bay is unusual, beginning with a non-conformist chapel and then balanced between Anglican and Roman Catholic establishments. 
In 1839 there began by public subscription the creation of an independent chapel near the lighthouse at South Head,  inspired by Richard Siddons who had Congregational church leanings. It was opened at a ceremony on 18 July 1840 at which one of the speakers was a Samoan chief, Leatona.  A subsequent Congregational church operated in the heart of Watsons Bay's commercial area from 1891 to 1910.
Significant and neighbouring areas of Watsons Bay were allocated to the Anglican and Roman Catholic churches. In 1849 two acres (0.8 hectares) were set aside for the Catholic church, especially to serve the community of Portuguese descent. The church took some time to build and was fully completed only in 1881. In 1910 it was replaced by Our Lady Star of the Sea, which was improved with a choir gallery and new facade in 1940 and further changes in 1965–66.
Support for an Anglican church dates from 1847,  but it took until 1864 to build and consecrate the church of St Peter's (designed by Edmund Blacket) on the site to the southeast of the Catholic church. It came to serve the expanding professional classes occupying the new suburb of Vaucluse. The church hall from 1911 and the rectory from 1925 were added to the site, as were the gates dedicated to the memory of those killed in the Greycliffe ferry disaster and completed in 1929, when St Peter's became a full parish.
A privately run school operated in Watsons Bay in the late 1840s. Following efforts of local residents, the South Head School was opened in 1859. It was funded but not initially owned by the colony's school authorities. In 1877 a school opened on Old South Head Road between the Catholic and Anglican churches, catering to up to 100 pupils, but pressure of numbers grew. A separate Catholic convent school operated next door for a period in 1907. With further suburban growth a new Vaucluse school was opened in 1925, and the old school became a Scout and Guide centre and was renamed the Gunyah.
Transport and tourism
From the very first years of the British colony, Watsons Bay, South Head and Camp Cove provided a favourite area for escape from Sydney town, by water or road, to enjoy the vistas of ocean and harbour. Facilities gradually developed to both service and attract visitors.
Travel by boat provided the easiest access, though the staff of the lookout at South Head also used a rough foot track to Sydney town. In 1803, a track 15 feet (4.5 metres) wide was cleared by a contract for £100 to surgeon John Harris. This proved an unsatisfactory construction, possible for horses but difficult and dangerous for carriages. 
Governor Macquarie's development of the city led to a new link from Sydney, following the route of today's Old South Head Road. The major work was carried out in 1811 by soldiers of the 73rd Regiment,  and allowed access to arriving vessels moored in Watsons Bay while awaiting a berth in Sydney harbour.
A major function of the new road was as a place of recreation, a dramatic contrast to the businesslike role of the roads leading from Sydney to the challenging interior.
By August 1812 it could be reported that
the new road to South Head, so far as it is now carried, presents to the inhabitants of the Town a beautiful avenue of recreation, either as a pleasure ride or promenade, that attracts the wonder of the meditating passenger 
By 1819–20 it had again become preferable to visit South Head by water because of the poor condition of the road, and major repairs were undertaken, with complaints and occasional repairs again in successive decades.  Potholes were not the only threat to weekend travellers, as bushrangers also threatened the South Head Road.
A second road near the harbour – later to be defined as New South Head Road – was developed in the 1830s. The two roads met near the Macquarie lighthouse and terminated at the signal station. Visitors by land had to take a rough track down to Watsons Bay, until around 1854 when the road was extended down to the ferry and the newly subdivided land.
Also from 1854, the first regular ferry service (twice daily) was announced by the Sydney and Melbourne Steam Packet Company, which was by then the owner of the former Laing's grant, and the ferries docked at Victoria Wharf adjacent to this land.  It reverted to an irregular and excursion timetable, but from 1876 a regular ferry service operated to Watsons Bay and by 1881 a new wharf was built in the present location. The South Shore Steam Ferry Company (and its successor Sydney Ferries Ltd) provided a full ferry service, for both visitors and commuters (which included school children) until 1933. Apart from excursion ferries, it was not until the 1970s that regular ferries returned to Watsons Bay. A major tragedy struck in 1927 when the ferry Greycliffe was struck by the ocean liner Tahiti while on the way to Watsons Bay. Over half of the 40 fatalities were residents from or near Watsons Bay.
Ferry transport widened the range of those who could take an excursion to the area, and stimulated the growth of facilities for visitors. With the arrival of the ferry came the opening of the Marine Hotel (including its zoo) and its successors. Back on Military Road, the Gap Hotel opened by the early 1860s, and around 1886 the Palace Hotel (today a residential hotel and popular bar) opened near the ferry wharf. Next door, a Tea Room on Marine Parade opened around 1885 (with boat hire for fishermen). It transformed into the Ozone Tea Rooms in 1908, and then became Doyle's restaurant, an iconic Sydney landmark. In 1904 the Marinato family opened a refreshment room on the wharf itself, leased for 2s/6d a week, and this expanded until, in 1968, the Doyle family bought it. A new Gap Tavern operated from 1961 to 1997.
From 1903 the tramline brought visitors as far as the signal station, where the Everitt's Signal Dining Rooms and the Grand Pacific Hotel could be found. This required a long walk down to Watsons Bay until in 1909 the tramway was extended to Military Road just between The Gap and Robertson Park, with a cutting through Gap Park. The trams were discontinued in 1960 and were replaced by buses.
While many visitors simply swam at Camp Cove, swimming facilities have existed for over a century. Local men defined the rock-cut 'bogey hole' west of Green Point in the 1880s, and in 1895 the new Vaucluse Council agreed to improve it. But in 1905 new baths were built with a diving tower and enclosed with shark nets on Watsons Bay beach itself, and in 1927 these too were completely re-built, with a pool for racing and water polo added around 1963.
Administration and community
In the early years of the colony, Watsons Bay was of interest to the government because of its location: the site for staff of the lookout and signal station, for the lighthouses, for pilots and the water police. Its military importance grew with the fortification of South Head from the 1850s. Land grants were initially given to public servants whose role brought them to this extreme end of the city. The development of a mixed and larger community, especially after the subdivision of Laing's grant in 1855–56, brought the area's development more into the sphere of Woollahra Municipality (established in 1860). But with the growth of housing in adjacent Vaucluse, a Vaucluse Municipality was established from 1895. It took over the site of the former Gap Hotel in 1910 as the new town hall. This site remained in use until the move into Dunbar House in 1924. After that date, the site was acquired by the Vaucluse Masonic Lodge, and in 1926 divided into a masonic hall and a cinema on Military Road.
As a place to live, a place to work, and a place to visit, the history of Watsons Bay is intricately woven with that of South Head, Camp Cove, The Gap and HMAS Watson. It has developed churches and church meeting rooms and schools, had its own shops, services, post office, multiple hotels and tea rooms, a cinema and even a zoo. It has been a destination for private boats and carriages, for trams and ferries, and more recently buses and private cars. The character of its residents may have changed, the number of its visitors too, but its dominant features, defined by its access to harbour and ocean, remain unchanged and unchangeable.
J Jervis in V Kelly (ed), The History of Woollahra, Sydney, Woollahra Municipal Council, Sydney, undated 
Megan Martin, 'A Thematic History of Watsons Bay', unpublished manuscript in Woollahra Library, 1997
Out look, Woollahra Disctrict Heritage Society, Double Bay