The town grew around a station originally named Geluk, after the sheep farm it was built on, but in 1894 the name was changed to honour Major Joachim Machado, an engineer who had surveyed the land for the proposed Pretoria-Delagoa Bay railway line.
The settlement became a capital for a few months from 5 June 1900, but was only declared a municipal town in 1904. This quirk in history happened during the Second Boer War when the Transvaal Volksraad made the town their temporary seat, using railway carriages as their offices and mint after they had to evacuate Pretoria in the face of a British invasion.
A quick-thinking station master rescued a consignment of dying trout by dumping the fish in the Elands River, which formed the start of the town's subsequent role in Mpumalanga's trout tourism industry. With the demise of passenger trains in South Africa, the once-postcard-pretty station closed in 2001 and it is now a derelict ruin.
In the 21st century, Machadodorp's residents either work for the industries feeding a chrome smelter, or the logging industries based on the pine plantations surrounding the town. A large contingent of contract workers employed at the Nkomati mine about an hour's drive out of town also reside in Machadodorp, contributing a large part of the town's economy.
The Komati Gorge, notable for its considerable biodiversity and bluff habitats, forms a backdrop to the town