The name of Osney is Old English, and means either "island in the Ouse" (possibly an old name for the Thames) or "Osa's Island". Until the early 20th century the name was applied to the island formed by two streams of the River Thames immediately west of the centre of Oxford, Castle Mill Stream and the stream which is now the main channel of the river. To the north the island is bounded by a short channel between the River Thames and the Castle Mill Stream, the Sheepwash Channel, which separates it from Fiddler's Island.
Osney Abbey was founded on the south part of the island in 1129, and Rewley Abbey was founded in the north of the island in 1280. Osney Mill was established by Osney Abbey on the west side of the island. The lands of both abbeys passed to Christ Church following the Dissolution of the Monasteries in 1538. The island formed part of St. Thomas's parish.
In 1790 the mill stream feeding Osney Mill on the west side of the island became the main navigation channel of the river, when Osney Lock was opened.
Until the beginning of the 19th century, only the side of the island east of St Thomas's Church was developed. In the 19th century the island changed significantly. The Great Western Railway built its line across the island from north to south in 1850, with new bridges across the Thames at the south end of the island, and across the Sheepwash Channel to the north. A new railway station was opened on the island 2 years later. In 1851 the Buckinghamshire Railway opened its line from the north across Sheepwash Channel to its Rewley Road station next to the GWR station. To house railway workers Osney Town was laid out in 1851 by George P. Hester, on an island west of Osney leased by Hester from Christ Church. In the 1860s New Osney was developed around Mill Street, south of Botley Road between the railway and the river. The Cripley estate, north of Botley Road, was laid out in 1878. Osney Cemetery was opened in 1848 in the south of the island.
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