Blanchewater was discovered, and named after Governor McDonnell's wife, by Babbage when leading an expedition in search of gold in 1856. A year later it was surveyed by G.W. Goyder and stocked with cattle by John Baker who was granted a 200 square mile lease over the area for fourteen years in 1858. While surveying the lease Goyder noted a large number of teal, ducks, geese, cranes, cockatoos, pigeons, shell-parrots, magpies, curlews, crows, hawks and many other birds flying around.
Soon Baker changed from cattle to sheep. Together with the South Australian Company he imported 10,000 sheep and stocked both Blanchewater and Pernunna stations and appointed Henry Dean as manager of Blanchewater. In 1861 the station was used by McKinlay as a starting point for the Burke and Wills relief expedition.
As a result of one of the most devastating droughts ever to hit South Australia John Baker lost almost 12,000 head of cattle, more than 8,000 sheep and 950 horses between 1863 and 1865. In 1865 Baker was forced to remove all women and children from Blanchewater. The breaking of the drought occured on 25 January 1866 when the whole place was flooded and most of the remaining sheep drowned or killed by the cold. This scenario would be repeated many time yet in later years. The last time being the 1980-1983 drought which was also followed by flooding.
During the 1860s the isolation at Blanchewater had been most severe. As a result of the drought and later floods the mail run from Adelaide had been interrupted many times. During 1865, when the mail was delivered via Yudanamutana, the postal authorities lost more than $285 on this leg of the run alone. A year later when the seasons had improved the mail run was extended from Blanchewater to Lake Hope.
By 1868 Baker had managed to lease even more land in the north and restocked Blanchewater with 175 head of cattle and 8,500 sheep. In 1870 the station was managed by J.H. Mules and within ten years Blanchewater had become one of the largest horsebreeding stations in Australia. John Baker died 18 May 1872 at Morialta leaving his wife as sole benefactor of his substantial estate. The leases were transferred to Thomas Elder.
The heyday of Blanchewater and its horses was during the 1880s when as many as a thousand foals were born each year. They were used by Cobb & Co coaches and as buggy horses in Adelaide. The majortity however were used for stock mustering and as remounts for the Indian Army. Its fame attracted not only business but also people who wanted to work on the station. One of them, James Tiernay, came all the way from Canada. He worked at Blanchewater until his death on 6 August 1887. In 1891 it was decided to change back to sheep and more than four thousand horses were sold.