In February 1863 Parachilna was surveyed by Arthur B Cooper. It was expected to remain a small town and as a result only twenty-four townblocks were pegged out. The main reason being the closeness near a well sunk by the government to make transport in the northern Flinders possible. Other towns surveyed that year were Yarrah, Mount Eyre, Hookina, Mern Merna, Edeowie, Kanyaka, Oratunga and Nuccaleena.
Situated in the foothills close to the Parachilna Gorge, there soon developed a steady stream of traffic between the infant town and the rapidly developing Blinman mining settlement, and its North Star Hotel. For a short time during 1869 this traffic was disrupted when the narrow gorge was closed to camel traffic. Apparently camels and horses did not see eye to eye and horses often bolted when camels approached.
At the beginning of 1873 Arthur B Cooper, now Deputy Surveyor-General, offered small parcels of land for lease for a period of fourteen years at $10 per year. They were to be used for the building of public accommodation houses and the supply of well water to travellers and their stock. One of these was near the town of Parachilna. It was taken up by Edmund Arthur Gliddon and in March 1874 he was granted a wine licence. After the death of his ten month old daughter Maryanne in 1875, Gliddon transferred the business to Watson Buntin and took up employment at Umberatana station. Gliddon died a year later at the age of twenty-nine and was burried at Sliding Rock.
When the railway from Port Augusta to Farina was constructed the line was build on the plain more than ten kilometres to the west of the town. This did not satisfy anybody. In 1881 tenders were requested for the construction of a goods platform and office at Parachilna Creek. Within a year the Blinman mine owners and business people wanted a branch line from Parachilna Siding through the gorge to their mine in Blinman. Much to their discontent it was never build and goods were often lost after been left on the platform or damaged during the thirty kilometres trip to Blinman.
Slowly but surely, people from Parachilna started to move to the railway siding where the Prairie Hotel was build followed by a Post Office. Soon after cattle yards were constructed and in 1888 the government even considered an irrigation scheme at the siding. As more and more people left Parachilna in favour of the siding the government had to open a polling booth for the 1890 elections. Finally a new town was surveyed in 1890 at the siding which now became Parachilna. Very few people remained at the old place near the government well.