First mentioned as Ollanege (Olla's island) in 932,
 the town has a history as a
lace-making centre. The place, later called Olnei was held in 1086 AD by Bishop Geoffrey of
Coutances as its overlord, according to the
English Civil War, Olney was the site of the
Battle of Olney Bridge.
In the late 18th century, William Cowper and John Newton collaborated here on what became known as the
John Newton, author of the
Amazing Grace," was
curate of Olney and is buried here. His guest was
William Cowper (English poet and
hymnodist (1731–1800)). The town has the
Cowper and Newton Museum dedicated to them. The museum was adapted from Cowper's former residence, which was given to the town in 1905 by the publisher William Hill Collingridge (who had been born in the house). Newton was succeeded as curate in Olney by the biblical commentator
The hamlet of Olney Park Farm to the north of the town of Olney derives its name from a park established in 1374 by Ralph, Third Baron Bassett of Sapcote in Leicester. In 1861 it attained civil parish status, but was subsequently incorporated into an enlarged Olney civil parish around 1931.
Olney formerly had
its own railway station on the
Bedford—Northampton line, but the line was closed in 1962.
Olney Pancake Race
Signpost advertising 2009 Pancake Race
Since 1445, a
pancake race has been run in the town on many
Pancake Days, the day before the beginning of
 Tradition records that in 1445 on
Shrove Tuesday, the "Shriving Bell" rang out to signal the start of the Shriving church service. On hearing the bell a local housewife, who had been busy cooking pancakes in anticipation of the beginning of Lent, ran to the church, frying pan still in hand, tossing the pancake to prevent it from burning, and dressed in her kitchen apron and headscarf.
The women of Olney recreate this race every Shrove Tuesday (known in some countries as
Mardi Gras or
Fat Tuesday) by running from the market place to the Church of St. Peter and St. Paul, a distance of over 400 yards. The traditional prize is a kiss from the
verger. In modern times, Olney competes with the town of
Kansas in the
United States for the fastest time in either town to win the "International Pancake Race". There is also a children's race, run by children from the local schools. The children have to run a distance of about 20 yards. This competition has been run every year since 1950.