The town was founded by the VOC Dutch East India Company in 1786, being named after the then governor of Cape Colony, Cornelis Jacob van de Graaff, and his wife, whose maiden name was "Reinet". Graaff Reinet.
In 1795 the burghers smarting under the exactions of the VOC, and under the leadership of Adriaan van Jaarsveld expelled the Landdrost Maynier and proclaimed an independent "Colony of Graaff-Reinet," requesting guardianship under the government in the Netherlands (and not the VOC). Similar action was subsequently taken by the burghers of Swellendam. Claims that the two "independent" regions wanted to be independent republics, were found to be untrue. Before the authorities at Cape Town could take decisive measures against the rebels, they were themselves compelled to capitulate to the British who invaded and occupied the Cape. The burghers having endeavoured, unsuccessfully, to get aid from a French warship at Algoa Bay surrendered to Colonel (afterwards General Sir) JO Vandeleur.