The town was founded in 1679 by the Governor of the Cape Colony, Simon van der Stel, who named it after himself. It is situated on the banks of the Eerste River ("First River"), so named as it was the first new river he reached and followed when he went on an expedition over the Cape Flats to explore the territory towards what is now known as Stellenbosch. The town grew so quickly that it became an independent local authority in 1682.
The Dutch were skilled in hydraulic engineering and they devised a system of furrows to direct water from the Eerste River in the vicinity of Thibault Street through the town along van Riebeeck Street to Mill Street where a mill was erected. Early visitors commented on the oak trees and gardens.
During 1690 some Huguenot refugees settled in Stellenbosch, grapes were planted in the fertile valleys around Stellenbosch and soon it became the centre of the South African wine industry.
In 1710 a fire destroyed most of the town, including the first church, all the Company property and twelve houses. Only two or three houses were left standing.When the church was rebuilt in 1723 it was located on what was then the outskirts of the town, to prevent any similar incident from destroying it again. This church was enlarged a number of times since 1723 and is currently known as the "Moederkerk" (Mother Church).
The first school had been opened in 1683, but education in the town began in earnest in 1859 with the opening of a seminary for the Dutch Reformed Church. Rhenish Girls' High School, established in 1860, is the oldest school for girls in South Africa. A gymnasium, known as het Stellenbossche Gymnasium, was established in 1866. In 1874 some higher classes became Victoria College and then in 1918 University of Stellenbosch. The first men's hostel to be established in Stellenbosch was Wilgenhof, in 1903.
In 1905 the first women's hostel to be established in Stellenbosch was Harmonie. Harmonie and Wilgenhof were part of the Victoria College. In 1909 an old boy of the school, Paul Roos, captain of the first national rugby team to be called the Springboks, was invited to become the sixth rector of the school. He remained rector until 1940. On his retirement the school's name was changed to Paul Roos Gymnasium.
In the early days of the Second Boer War (1899–1902) Stellenbosch was one of the British military bases, and was used as a "remount" camp; and in consequence of officers who had not distinguished themselves at the front being sent back to it, the expression "to be Stellenbosched" came into use; so much so, that in similar cases officers were spoken of as "Stellenbosched" even if they were sent to some other place.
More on the history of this beautiful town in Wikipedia's Stellenbosch