Dalwhinnie is a "meeting point" where cattle drovers' routes from the north and west converge with the Strathspey route before heading south together. In the 1830s, these roads were replaced by military roads supervised by General Wade, who also established a scattered settlement here. The distillery was originally named "Strathspey" and was founded in 1897 by three men from nearby Kingussie. However, they quickly fell into financial difficulties and the distillery was sold. The new owners renamed it "Dalwhinnie" and commissioned Charles Doig to carry out renovations, then sold it in 1905 to Cook & Bernheimer, then America's largest blending company. This marked the first time foreign capital acquired ownership of a Scottish distillery, but it only lasted 14 years; when the United States announced Prohibition, Dalwhinnie had to be sold again. The new owners were the renowned blending firm Macdonald, Greenlees & Williams. The latter joined D.C.L. in 1926, and Dalwhinnie was licensed to James Buchanan & Company. In 1934, the distillery was severely damaged by fire. Until that year, the village where the distillery was located still had no electricity and was lit by kerosene lamps. It was rebuilt and reopened in April 1938; the original still room was converted into today's mash house. It was briefly closed again during the Second World War. There was another renovation in the 1960s. In 1961, the stills were converted to indirect steam heating (initially coal-fired boilers, converted to oil in 1972). In 1968, local malting ceased. In 1979, British Railways closed the private siding behind the distillery. Between 1992 and 1995, the distillery was closed for major refurbishment. Dalwhinnie Single Malt was selected by U.D.'s "Classic Malts" series as the representative of Highland style, making it famous overnight.

Dalwhinnie was Scotland's highest distillery at 1,073 feet until Braes of Glenlivet (now Braeval) was built in 1973. It's remote (though near the main A9 north) and the coldest distillery, averaging 6°C. Since 1973, Dalwhinnie has operated as a "weather station," recording daily data on temperature, wind, humidity, visibility, frost, and sunshine hours—even on Christmas and New Year's—and sending it to Edinburgh. This was once the manager's duty, now shared by manager and operator. Distillery worker Harry Christie recalled playing football in 1963 on a pitch covered in five feet of snow, using a six-foot-high road marker as a goalpost. Philip Morrice wrote in 1987: "Even in May, visiting this wind-swept place is like going to a forgotten outpost." Dalwhinnie being snowbound for weeks is common, though this may change with global warming. In 1986, the distillery's worm tub condensers were replaced by shell-and-tube condensers from Banff Distillery, but this significantly changed the spirit's character, so they reverted to worm tub condensers in 1995. In such a remote place, family generations working at the same distillery is common. Tour guide Maureen Stronach, who worked 35 years, succeeded her father and grandfather (both distillers) and three uncles. Her late husband was a stillman; now her brother Hamish (21 years at the distillery) and son also work at Dalwhinnie as stillmen/operators.