Tobermory Distillery has a turbulent history. In the 1880s, like Pulteney, under the impetus of the British Fisheries Society, the local laird, the 5th Duke of Argyll, planned to transform the village into a fishing station. The project was entrusted to "Mr. Stevenson of Oban" (see "Oban") and the Duke's factor, but the plan was criticized by another Stevenson—Robert Stevenson, the great lighthouse engineer and father of Robert Louis Stevenson. Regardless, Tobermory never became a true fishing port. The distillery was probably established between 1795-1798 by John Sinclair, a "merchant" who owned the Lochaline area on the Morvern peninsula—though he didn't obtain the land title until 1823. However, an engraving of Tobermory made by William Daniell in 1813 shows no trace of a distillery. Barnard, describing it, is unusually brief, writing simply: "distillery founded in 1823". It was originally named "Ledaig". Mr. Sinclair appears to have been the licensee until 1837. There followed a dormant period between 1837 and 1878, after which it changed hands several times. The final owner mothballed the distillery in 1887. Soon after, Tobermory was acquired by John Hopkins & Company, which purchased Speyburn Distillery in 1897 and joined D.C.L. in 1916. S.M.D. closed Tobermory in 1930 (the buildings later served as a canteen and power station), and in 1972 sold it to Ledaig Distillery (Tobermory) Ltd, a joint venture between Pedro Domecq and a Liverpool shipping company. Ledaig Distillery went into receivership in 1972, and by 1975 the new owners were in bankruptcy administration. Four years later it was sold to Kirkleavington Property Company of Cleckheaton, which in 1982 converted some distillery buildings into apartments while renting others as cheese storage warehouses. Production resumed in 1989, and Tobermory was sold in 1993 to Burn Stewart Distillers for £600,000 (plus £200,000 of stock). In April 2013, Burn Stewart was acquired by South African beverage giant Distell Group Limited for £160 million. Tobermory closed on March 31, 2017 for major refurbishment and was silent for two years; it has now resumed production.

The Tobermory brand was historically used for blended Scotch whisky, blended malt Scotch whisky, and single malt Scotch whisky. The malt distilled between 1972 and 1974 was bottled as 'Ledaig' and became highly sought after. Following Burn Stewart Distillers' acquisition, the branding was rationalized: Tobermory designates the non-peated single malt, while Ledaig represents the heavily peated expression. The distillery now produces both styles in equal proportion.