Tarzali is a rural village 22 km south-east of Atherton and eight km south of Malanda. It is thought that the name derived from an Aboriginal expression describing a local eucalypt species.
Tarzali was a product of the promotion of closer-settlement on the fertile and well-timbered Atherton Tableland. Its northern neighbour, Malanda, was surveyed for a township in 1909, and in the following year the Tableland railway reached there. The next stage encountered particularly rugged country, and reached Tarzali in 1916. (The final stage to Millaa Millaa was completed in 1921.)
The country was not only rugged but was heavily timbered. In 1930 the post office directory listed 19 farmers/selectors, 17 dairy farmers and 14 teamsters for hauling logs to Dunlop and Reids sawmill. The sawmill had at least nine mill hands. There was also a hotel and a primary school (1915-67). Dairy farmers could rail their produce to factories near Atherton, and later at Malanda and Millaa Millaa (1930). The 1949 directory revealed that sawmilling had lessened and the farm holdings (mostly dairy) numbered nearly 50.
In the 1950s the factories turned to road transport for milk, and the railway closed in 1964.
Tarzali has a sawmill and the Tarzali Lakes Aquaculture Centre. Its census populations have been:
In 2006 10.7% of Tarzali's employment was in dairying and 5.3% in other farming.