Anciently, it was part of the Kingdom of Ui Failghe from which it gets its present name. The British began occupation in the thirteen century, but did not gain control until the sixteen century when it was named King’s County in 1547 in honor of King Philip II of Spain. Its name was changed to Offaly in 1920 and it became part of the Republic of Ireland on its formation in 1921.

Tullamore, the largest town in Offaly is the 30th largest in Ireland is a market town, urban district, and the seat of County Offaly, Ireland, situated on the River Tullamore. The High Cross is all that remains of Durrow Abbey, which once stood to the north of Tullamore. The Book of Durrow, an illuminated manuscript of the four Gospels in Irish script, was written there about 700 and is now in Trinity College, Dublin. One of the earliest known settlements in County Offaly is at Boora Bog which dates to the Mesolithic era. Excavations here provide evidence of a temporary settlement as no structures were found at the site. Stone axes, arrowheads and blades were discovered which date to between 6,800 and 6,000 BCE. The Dowris Hoard dating from the Late Bronze Age was found in a bog at Dowris, Whigsborough near Birr. It is the largest collection of Bronze Age objects ever found in Ireland. Remains of ancient churches and monasteries are scattered along the countryside.

Offaly largely comprises a flat landscape and is known for its extensive bog and peatlands. The county consists of approximately 160 sq mi of peatland which is 21% of Offaly's total land area. The county contains many small lakes, and it also contains 100 acres of swamp land. Traditionally, agriculture and industry have been the main driving force of the economy in the county. Local trade in farm produce is augmented by food-processing industries and brewing. Peat, an important source of fuel, from the bogland, particularly in the northern parts of the county, provided employment to hundreds of people in Offaly by making peat briquettes (for home domestic use) and supplying peat to power stations operated by Electricity Supply Board. But with the continuing depletion of the bogs, several power stations have closed down in recent years. 
Two-thirds of the county’s improved farmland is permanent pasture, one-fifth is under crops, and the rest is used as meadow. Wheat and barley are among the most important crops. There are various light industries, including food processing and textile, furniture, and whiskey production. County Offaly is the home of Tullamore D.E.W. Irish Whiskey.