This suburb is thought to have been named after a sandstone house built in 1905 by MP Henry Willis. The house was called Innisfallen Castle and it overlooked the Sugarloaf Bay and Middle Harbour area; thus rendering the name of the suburb Castle Cove. In 1966 his son Dr Hastings Willis and his sisters, upon inheriting the property decided to subdivide the surrounding lands upon which several fine residences were constructed.

Today Castle Cove lends its name to some of the adjacent facilities in the locality such as Castle Cove Park and Castle Cove Golf Links.

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