The Interlake Region around Arborg is rich in Icelandic history. In 1876, the Canadian Government set aside a reserve for Icelandic settlers called the Republic of New Iceland along the west shore of Lake Winnipeg.
By 1887 the people of the reserve voted to become part of Manitoba and formed a municipality. Settlements on the shore of the lake gradually spread west along the Icelandic River and approached the present day site of Arborg in 1890. In 1901, the homestead of Ardal was settled which gave Arborg its name.
The Interlake Region where Arborg is located is a unique combination of landscape and terrain. The lake has a moderating effect on the climate and much of the area is covered in wooded areas of ash and poplar.
The land is relatively flat and much of the brush has been cleared for farming fields.