Port Ellen Single Malt Whisky holds a revered status among whisky collectors who appreciate peated styles. Although most of the distillery buildings remain, including two pagoda-roofed kilns (a third was dismantled in 2004 for safety reasons), collectors still mourn its loss. The dunnage warehouse on site is Scotland's oldest, still used for maturing long-aged Lagavulin whisky, while other buildings have been converted into small commercial units. The distillery began as a maltings, established before 1824 by Alexander Kerr Mackay with strong support from Laird Walter Frederick Campbell of Islay. In 1825, John Morrison began distilling whisky there as a sub-tenant, likely acting as agent for his uncle Ebenezer Ramsay. Ramsay was a Procurator Fiscal of Clackmannanshire with close ties to the Stein distilling dynasty and extensive distilling interests in the Alloa area. Their venture proved unsuccessful, however, and in 1833 Ramsay sent his son and nephew to Islay to survey the situation. His son reported that building a distillery there was unfeasible, but his nephew John Ramsay reported the opposite. John Ramsay (1815-1892) was just 18 years old. After training as a distiller in Alloa, he was appointed manager. Within a few years, he also managed affairs for the Laird of Islay and became his business partner in several ventures, including launching the first fortnightly ferry service between Islay and Glasgow. Ramsay became the island's leading agriculturalist, Chairman of the Glasgow Chamber of Commerce, and Liberal MP for Stirling (1868) and Falkirk (1874-1886). Upon his death, he owned the entire Kildalton Parish, having built numerous farmhouses, mansions, and cottages, and contributed significantly to improving agriculture on the island. Port Ellen passed first to his widow, then to his son, Captain Ian Ramsay of Kildalton. After World War I (during which he was wounded), maintaining the business proved difficult, and he sold the distillery to his former agents, James Buchanan & Company, who acquired it in partnership with John Dewar & Sons. These companies joined D.C.L. in 1925, bringing Port Ellen with them. From 1930, Port Ellen was managed by S.M.D. and soon closed (for 37 years), though the maltings continued to operate. In 1967, it was rebuilt on the original distillery site with four mechanically heated stills (converted to steam heating in 1970) and worm tub condensers. A drum maltings was built nearby in 1973, initially serving three S.M.D. Islay distilleries, then in 1987 signing an agreement with all Islay distilleries and Jura to meet at least part of their malting needs, keeping the maltings at full capacity. Port Ellen Distillery was mothballed in 1983 and closed in 1987. Since 2001, Diageo has released small quantities of Port Ellen annually as "Special Releases," all rare vintages from 1978 or 1979. These rare expressions are highly sought by collectors. On October 9, 2017, surprising news shook the whisky world: Diageo announced plans to reopen Port Ellen Distillery (alongside Brora Distillery) before 2020.

All Islay distilleries (except the newly opened Kilchoman distillery) are built on the coast to facilitate the transport of barley and coal, as well as whisky exports. In 1826, a pier was built at Port Ellen, and the village gradually expanded around it, named after Eleanor, wife of Laird Frederick Campbell of Islay. From 1869, the distillery's sales were handled by W.P. Lowrie of Glasgow, a pioneer in using sherry casks for maturation and the original supplier to James Buchanan. The great success of Buchanan's Black & White blended whisky enabled him to acquire Lowrie's company in 1906.