The traditional inhabitants of Yarrawarrah are the Tharawal people, with Yarrawarrah being an Aboriginal word meaning mountain ash. Yarrawarrah is also the name of a ridge which was located in the vicinity between Heathcote and Waterfall.

A history of the Yarrawarra suburb is available at the Dictionary of Sydney Yarrawarra page, contributed by a Sutherland Shire Library local studies librarian, a summary of which follows. Prior to Yarrawarrah being recognised as a suburb by Geographical Names Board in 1971, the area was known as North Engadine. Charles McAlister, a pioneering developer of Engadine area took up the first portions of crown land in 1887, likely offered for sale due to the opening of the Illawarra railway line to Waterfall earlier in 1886. The initial residents of the area in the 1920s consisted of the returning soldiers and their families after World War I and then later families moving from inner Sydney suburbs during the Depression. In the 1930s families were relocated to the area from existing unemployment camps in Cook Park at Botany Bay.

Through 1939 Industrialisation increased in the area with a clay and shale pit at the end of what is now Old Bush Road, although of limited impact other than to increase the visibility of the need of improved access. In 1952 bush fires caused significant damage further highlighting the limited access, and helped establish a new progress association in 1959 in front of the general store located on Old Bush Road. In 1962 the State Housing Commission announced it was planning a new suburb on 80 acres (32.3 hectares) of crown land between Loftus and Engadine and adjacent to the north Engadine settlement.

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