Scapa distillery is built on the Lingro Burn, overlooking the wide anchorage of Scapa Bay. In 1919, the German High Seas Fleet scuttled itself there, and in 1939, a daring German submarine sank the Royal Navy battleship HMS Royal Oak in this location. A local minister reported in 1701 that the parish held an ancient and grand drinking competition, claimed to have been founded by St. Magnus in the 11th century when he arrived in the Orkney Islands and presented the local chieftain with 'some strong liquor.' 'If the chieftain drank it all in one go, he would greatly approve of him, assuring him that all would go well in his domain.' Scapa distillery was established in 1885 by Glasgow merchants John Townsend and operated until 1919, when the distillery was nearly destroyed by fire. Fortunately, Royal Navy sailors stationed at Scapa Bay formed a bucket brigade to extinguish the flames. The distillery changed hands several times until it was purchased by Hiram Walker in 1954; they rebuilt the distillery five years later, installing a Lomond still (see 'Inverleven' and 'Miltonduff'). In 1978, the distillery underwent another modernization when the baffles were removed from the still, resulting in a traditional straight-necked still. In 1994, the distillery was closed again, but intermittent production began in 1997 by staff from nearby Highland Park. Between 1986 and 1987, Allied Distillers bought Hiram Walker, acquiring ownership of the distillery. In 2004, they invested £2.1 million in a major renovation, launching the first proprietary bottling and establishing a fan club. Production ceased again in 2005 due to renovation plans; later that year, ownership transferred to Chivas Brothers under Pernod Ricard, who resumed production in October 2005 to mark the distillery's 120th anniversary.

When Alfred Barnard visited Scapa in 1886, he described it as 'one of the most complete small-scale distilleries in Britain.' A large water wheel powered by the Lingro Burn supplies electricity to the distillery. Since 1959, Scapa has been operating a Lomond still. This still came from the Glenburgie distillery, and although the adjustable plates have been removed, it remains one of only two such stills in existence today. As an island distillery, Scapa's choice to produce unpeated whisky is unusual.