On the 27th of February 1880, 11 acres of land on the Capel River was acquired, on which a brick building consisting of six rooms was erected. Initially, the location was a half way point for the mail coach between Bunbury and Busselton. To cater for the coach passengers, a liquor licence was obtained and the building later became known as the Capel Inn.
Capel Inn was established in 1880 by Charles Properjohn. The hotel has since continued to be a focal point for the locals and visitor alike.