In 1786, the distillery was founded by the locally respected George Taylor (a flax producer, postmaster, and banker) in partnership with the Duke of Gordon, equipped with a 40-gallon still. Originally named Milltown, it was renamed Milton after 1825 (though its spirit was still called "Strathisla"). In 1830, the distillery passed to banker and grain merchant William Longmore, and in due course was transferred to his son-in-law J. Geddes Brown, who incorporated it as William Longmore & Company Ltd, with most shares held by locals. Notably, London gin manufacturer Sir Robert Burnett & Company bottled vast quantities of single malt whisky as "Longmore's Strathisla" in the 1880s (reported in the 1885 Moray and Nairn Express): "Wherever you go, you find connoisseurs speaking with enthusiastic and unqualified praise of the produce of the Milton distillery in Keith." Longmore & Company owned Milton until 1950, when James Barclay purchased the distillery for £71,000 and immediately sold it to Seagram Company. Thereafter, the distillery was renamed "Strathisla" after its flagship product. After Longmore & Company was edged out, Milton was controlled by a dubious London financier named Jay Pomeroy, who extracted large quantities of matured whisky and, according to a court judgment, "disposed of them in a manner that did not attract any duty"—meaning he sold the stock on the black market for huge profit, leaving the distillery chronically short of matured whisky for that period. Seagram immediately expanded production, installing two new steam-heated stills alongside the original coal-fired pair in 1965, and building large-scale warehouses nearby. Seagram's whisky interests were acquired by Pernod Ricard in 2001, with Strathisla now managed by its subsidiary Chivas Brothers.

According to the Banffshire Journal, in January 1876, Milton Distillery (now Strathisla) suffered a devastating fire: 'The cowshed contained 66 cattle, 30 of which perished in the flames; losses amounted to £700. Additionally, 500 quarters of barley, a threshing machine, and a steam engine were destroyed... total damages estimated at £3,800.' Three years later, the malt mill exploded when 'a small stone rubbed against the mill's cylinder, creating sparks that ignited the highly explosive, powdery dust.' A unique feature was the water wheel installed in 1881 for electricity generation, which remained in service until 1965 to drive the rummager in the wash still. Milton/Strathisla boasts Scotland's tallest pagoda roof (though it appears modest since the distillery itself is small), unusually designed not by Charles Doig (the famed inventor and distillery architect) but by fellow architect John Alcock. James Barclay (1886-1963) was one of post-war whisky's most colorful figures. He began his career at Banff Distillery in 1902, later worked for Peter Mackie of White Horse, and in 1919 purchased George Ballantine & Son with a partner. In 1922, he acquired J. & G. Stodart (blenders) and immediately arranged US distribution—despite Prohibition. In Canada, he befriended Harry Hatch of Hiram Walker, selling him Ballantine's in 1935. The following year, representing Hiram Walker, he purchased Miltonduff and Glenburgie distilleries, joining the board of Hiram Walker [Scotland] Ltd. Mysteriously, he resigned in 1937 to join rival Seagram's, paving their way into Scotch by facilitating their acquisitions of Chivas Brothers and Strathisla Distillery (then Milton).