The Bunnahabhain distillery is located in the north of the island of Islay, directly at the mouth of the Margadale River on the Islay Sound. Officially founded in 1883, the only connection to the mainland and the rest of Islay was the sea route, which could only be accessed by small vessels. It was not until 1960 that the distillery and the small village of Bunnahabhain, which had developed around it over the years, were connected to the rest of Islay by a road with the rest of the infrastructure. With the new road, raw materials could be transported to Bunnahabhain more quickly and easily – the finished single malt could be transported back more easily. With the increase in production, demand also increased – and in 1963 the distillery was expanded by a wash still and a spirit still each.

Bunnahabhain uses the low-peat water from the Margadale River for its single malts; the malt comes mostly from the Port Ellen distillery. At Bunnahabhain, sherry barrels are often used, which give the maritime, slightly peat-like whiskies a pleasant sweetness.