Surprisingly, as a place remote from tax collectors, Jura Island already had a licensed distillery as early as 1810 – at Craighouse, which is both the distillery's current location and the former site of the illegal Small Isles Distillery. The license was granted by the island's laird, Archibald Campbell. Several tenants operated the distillery successively, but with little success. The first was William Abercrombie (until 1831), followed by Archibald Fletcher (until 1851). When Fletcher gave up the lease, only 5,450 gallons remained in bond. Campbell's son wanted to sell the stills (valued at £400) as scrap. Soon after, Norman Buchanan of Glasgow bought the distillery (he also acquired Caol Ila Distillery during the same period), but went bankrupt ten years later. After several years, in 1876, the local laird signed a 34-year lease for the distillery with James Ferguson of Glasgow. However, this laird abandoned the distillery in 1901 (taking all the equipment he had purchased with him). To avoid paying taxes, the laird removed the distillery's roof, and the original distillery fell into ruin. In 1963, the distillery was rebuilt by two local landowners, Robin Fletcher and Tony Riley-Smith (the latter being the uncle of the founder of Whisky Magazine), with the aim of creating more employment opportunities on the island. With support from Mackinlay Macpherson & Company (which was soon taken over by Scottish & Newcastle Brewers), they hired William Delmé-Evans, who had designed and built Tullibardine Distillery in the late 1940s. He wrote: "We intend to produce a Highland-style malt whisky, different from that peaty nonsense – the last production was back in 1900." The first single malt was released in 1974. Dr. Alan Rutherford (UD's Production Director from 1976-1978) expanded production from 2 to 4 stills. Invergordon Distillers acquired Mackinlay and its distillery in 1985, and ten years later it was purchased by Whyte & Mackay.

The stills designed by Delmé-Evans are unusually tall, enabling the production of a lighter, more delicate malt whisky. The former manager's apartment in the main house was renovated in 2006 and is now available for rent. Jura has always used a distinctive wasp-waisted glass bottle that is elegant and even slightly sensual. This bottle shape was originally used by MacKinlay & Birnie for their Glen Mhor malt whisky, and Jura has employed it since its inception. In recent years, sales of Jura single malt whisky have increased dramatically, rising from 350,000 bottles in 2010 to 1.9 million bottles in 2014, making it the third best-selling malt whisky in the UK. This success is partly attributed to the legendary master blender Richard Paterson of Whyte & Mackay, who is responsible for selecting the casks and spirit.