In the winter of 1850, Scotland was hit by a severe storm. In the Bay of Skaill, the storm tore earth from a large irregular mound. When the storm passed, villagers discovered the outlines of a village consisting of several small houses without roofs. Excavations began, but were abandoned in 1868.

The site remained untouched until 1913, when it was looted in a single weekend by a party with shovels, who took an unknown amount of artefacts. In 1924, another storm tore away part of one of the houses, and it was decided to secure the site and investigate it thoroughly. The excavations opened up a stone-built Neolithic settlement, sometimes called the "Scottish Pompeii" because of its excellent preservation. The site was occupied from roughly 3180 BC to about 2500 BC and is Europe's most complete Neolithic village and older than Stonehenge and the Great Pyramids of Giza.

The rectangular houses, built of stone, used earth sheltering: built sunk in the ground, into mounds of prehistoric domestic waste. This provided the houses with stability and also acted as insulation against the harsh winter climate. On average, each house measures 40 m² with a large square room containing a stone hearth used for heating and cooking. Given the number of homes, it seems likely that no more than fifty people lived in Skara Brae at any given time. The dwellings contain several stone-built pieces of furniture, including cupboards, dressers, seats, and storage boxes. Cattle, sheep or goats and pigs were kept around Skara Brae, barley was grown. The arl (a simple plough) was already known. In addition, the inhabitants lived from game, fish, mussels and seabirds or their eggs. A workshop was found in Skara Brae where local stones were processed. Finds of haematite from Hoy show that there was an exchange between the islands of the archipelago.