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The town has only existed since about 1800 but grew rapidly: by 1821 it had a population of 600. During the Great Famine (1844 – 1848) many farmers were evicted by the unpopular landlord Moroney. In the years after the famine the (Protestant) Moroney family went on with rack renting and evictions. At one time the population had enough and started a boycott. The government did not like that and imprisoned all pub-owners and shopkeepers who refused to serve the family or their servant. So at the end of 1888 most pub-owners and shopkeepers were in jail.
Milltown is also home to the site of the Rineen Ambush which is located near Rineen on the main road to Lahinch and Ennistymon. On September 22, 1920 a RIC tender was ambushed there by Mid-Clare Brigade IRA mainly in retaliation for the killing of Martin Devitt at Crow’s Bridge earlier in the year. The ambush led to the deaths of six policemen. In reprisal for Rineen Ambush, the Black & Tans ran amok in Ennistymon, Lahinch and Milltown Malbay killing six people and burning 26 buildings, including Ennistymon and Lahinch Townhalls.
The Atlantic Hotel was one of the victims of the War of Independence. Owned by the Moroney family and mainly visited by English gentry it had no future and closed down around 1925. Milltown Malbay was served by the West Clare Railway, which operated from the 2 July 1887 and finally closed on 1 February 1961.
The town had a population of 575 according to the 2011 Census. Including the rural area around the town it counts 1,580 inhabitants