Magnetic Island, 10 km north of Townsville and administered by Townsville City Council, has an area of 5184 ha of which about three-quarters are national park (1953). The balance is freehold or leasehold, mainly on the south eastern and northern shorelines. The northern settlement is Horseshoe Bay and the south-eastern part includes Nelly Bay, Arcadia and Picnic Bay.

Originally named Magnetical Island by James Cook in 1770, it was thought that the topography caused his ship's compass to behave erratically. The granite spine of the island (Mount Cook's elevation is 497 m) suggests a magnetic influence, but tests have not revealed it.

Pine trees on Magnetic Island were harvested in the 1870s, but the first permanent European resident is thought to have been Harry Butler probably in the late 1870s. His daughter Ellen, born 1872, was known as Nellie, and it was after her that Nelly Bay was named. She remained on the island to manage a guest house.

Not far from the Butler guest house, Robert Hayles erected a hotel at Picnic Bay in 1899. He added a jetty and a dance hall and his business developed as Hayles launch and cruising service.

By the 1920s Magnetic Island was both popular and populated. Residents carried out mixed farming, fruit growing (especially pineapples) and dairying. A Townsville tourist guide (1924) described the island as ideal for surf bathing and a picnic resort, 'nestling in the bosom of Cleveland Bay ... where brain fog is quickly dispelled and highly-strung nerves are soothed'. Both Picnic Bay and Nelly Bay had dance pavilions, the latter including the thatched Mandalay guest house (1912) and Dutch-design cottages. Alma Bay at Arcadia was a favoured swimming spot. All three places had jetties. A school was at Picnic Bay and another was opened in an old kiosk at Mandalay, Nelly Bay in 1924. A tiny building, it later served as an Anglican church. Picnic Bay's school (1921) closed in 1970 and later became a craft shop. It is heritage-listed. The Picnic Bay surf life-saving club began in 1927.

Horseshoe Bay, the island's longest beach on the northern shore, was first settled by Europeans in 1912, but only for a few years. The next settlement was a nearby defence fort built in 1942 to protect Townsville. It is on the Australian heritage register.

Nelly Bay is the principal township, and since 1971 has been under threat of comprehensive development. Rights for development were onsold several times and Magnetic Keys (later known as Magnetic Quay) mounted an ambitious 30 ha tourist/commercial complex in 1986, involving breakwaters, dredging and a marina basin. When the breakwaters were nearly complete the promoter went into receivership, leaving a fenced-off eyesore. Tidal flushing of the bay was facilitated by a culvert in the breakwater. The residents kept to the shoreline and used the breakwaters for exercise walking.

Nelly Bay has the island's main shopping centre, a primary school, a church and a swimming pool. Picnic Bay to the south has a golf course, a surf life-saving club, a swimming enclosure and a church. Its ferry terminal was transferred to Nelly Bay in 2003 but the jetty remains there. Arcadia, in the opposite direction, has a bowling club and two churches. Its surf life-saving club is on Alma Bay.

The Magnetic Island car and passenger ferry runs daily services from Townsville and Sunferries run commuter and tour services during day and evening hours. The island has a local bus service.

In 2003 the Nelly Bay harbour works were completed and opened, coinciding with a surge in waterfront property prices. Classified as a 'suburb of Townsville' by some commentators Magnetic Island also gained the status of a get-away resort. Magnetic International Resort, 800 m from the Nelly Bay harbour, was opened in 2005. Property and land prices were underpinned by land being freehold, in contrast to leasehold on many Barrier Reef islands, and by 70% of Magnetic Island being World-Heritage listed.

Census populations have been:

 area1911196619861991200120062011
Magnetic Island50-197726693278-2199
Nelly Bay-140684105113119731055
Picnic Bay-237535538577360335
Arcadia-215481625764258238
Horseshoe Bay-147-431590484538

Some figures prior to 2006 include visitors.

Further Reading: 

Judith Jensen, Magnetic Island heritage study, Townsville, Council of the City of Townsville, 2002

James G. Porter, Discovering Magnetic Island, Tully, Kullari Publications, 1983

Queensland Government Intelligence and Tourist Bureau, Townsville and Ayr districts, North Queensland, Brisbane, the Bureau, 1924