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Early settlement
When the Christchurch settlement was planned, a secondary market town named 'Mandeville' was proposed by Captain Joseph Thomas to support north-Canterbury farmers. Charles Torlesse surveyed the area in 1849 and on early maps it is marked to the south-west of modern-day Kaiapoi. The Canterbury Association ran out of money in 1850, and surveying work came to a stop before the town could be established. While the name of 'Mandeville' stuck for the surveyed region, the area of the future township remained 'Kaiapoi' due to the continued presence of Ngāi Tahu families in the area.

In 1851, Sir Thomas Tancred proposed a new settlement in Canterbury. He was concerned that the Canterbury Association had not made enough progress in establishing the promised Anglican model values in their new settlements. The name for this proposed settlement was to be 'Gladstone'. Tancred wrote to Henry Sewell, asking him to instruct John Robert Godley to set aside land for the Gladstone settlers. By this stage in 1852 the Canterbury Association was not performing well financially, and was soon to wind-up and hand control to the newly-formed provincial government. Sewell forwarded the message, but Godley took no action to advance the plan. Thus, when the Gladstone settlers began arriving in 1853 they discovered no land had been set aside for them. The mouth of the Waimakariri River was suggested as a possible place for their new town, as much of that land had been set aside for the use of the church. An inspection party of settlers were joined by Sewell and surveyor Thomas Cass to explore the area. The group agreed on a location at the confluence of the north and south branches, close to where the proposed North Road met the river.

However, tensions flared the following day at a meeting between the settlers, Sewell, and Charles Simeon. An offer of 50 acres of church land was made and agreed to, but the settlers had additional demands that could not be immediately met. After an argument, Sewell and Simeon decided to end the Gladstone scheme, as it was proving to be too much trouble. However, the suitability of the site was so great that Sewell began the work of establishing the town anyway, but rather under the direction of the Canterbury Association and not the Gladstone settlers. Soon 200 acres of church land was marked off, and in 1853 Henry Cridland had laid out a map of the new settlement. By early 1854 the road to Kaiapoi was well-trodden, and the small settlement had begun to form.

Despite the collapse of the Gladstone scheme, many of the Gladstone settlers became established at Kaiapoi. Notable figures included the Reverand John Raven, who commissioned the first church in the area. The wooden building of St Bartholomew's church was opened in 1856, to plans by Benjamin Mountfort. Today it is the oldest surviving church in Canterbury.

In 1857 Kaiapoi was declared a town by the provincial council.

Rural hub
Kaiapoi was an important hub for the early north Canterbury settlers, largely due to the river port that was established there. The mouth bar of the Waimakariri River posed a significant hazard to ships, and many ran aground. The river was also notorious for changing course and flooding unexpectedly. Despite this, the north branch of the river was navigable to Kaiapoi by small coastal shipping vessels. This port transported wool and wheat from the local farms to the major port at Lyttelton.

During the great storm of 1868 the Waimakariri flooded, destroying buildings, bridges, telegraph lines and port facilities. Later that same year, a tsunami triggered by an earthquake in Peru did further damage to the wharves.

The rail line from Christchurch to Kaiapoi opened in April 1872, beginning a decline in the use of Kaiapoi as a port. Coastal shipping did continue to be a major part of industrial transport in the area, however. Local businessman John Sims purchased coastal shipping vessels and expanded the wharf facilities at Kaiapoi during the 1870s and 80s. It was not until 1904 that the Kaiapoi Railway Station was opened.

The Kaiapoi Woollen Milling Company was established in the late 1870s. This business produced high-quality woollen blankets and clothing, and was successful during the 1880s in spite of the wider economic recession. It continued to be a major pillar of the local economy until its closure in the 1970s.

2011 earthquakes
The town suffered significant damage during the 2011 Christchurch earthquake. Ultimately, more than 900 homes in Kaiapoi and nearby The Pines Beach were abandoned due to the earthquake damage to the land.