Caol Ila is derived from the Gaelic word Caol Ìle, which means "Voice of Islay", referring to the distillery's location overlooking the strait between Islay and the Jura. It was founded in 1846 by Hector Henderson. The distillery did not run well and changed hands in 1854 when Norman Buchanan, owner of the Jura Island Distillery, took over the distillery.
In 1863 the company was bought by Bulloch Lade & Co, a Glasgow-based whisky stock trader. According to the 1871 census, Duncan Johnston was the distillery manager at the time. Duncan is the nephew of John Johnston of Lagavulin and cousin of Laphroaig Johnstons, so the family runs another distillery on the island. By the 1880s, more than 147,000 imperial gallons (670,000 liters) of whisky were being produced here each year.
Caol Ila is a lighter Islay whisky with a lighter colour, peaty, floral and peppery notes. In addition to being sold as a single malt whisky, it is also used heavily (about 95% of its production) in blends such as Johnnie Walker's Black Label. Since 1999, the distillery has also produced a peat-free whisky.