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It is likely that Osmotherley means the clearing or 'ley' (pronounced lee), belonging to a Viking called 'Asmund' or a Saxon called 'Osmund'. There have been a number spellings of the Osmotherley over the centuries: the name appeared in the Domesday Book as Asmundrelac; it has also been known as Osmundeslay and Osmonderlay.

However, fanciful local legend says that Osmotherley was named after the mother of a villager named Oswald or Osmund, who supposedly went out to gather firewood in the winter. When she did not return her son became anxious and went out to look for her. He found her lying in the snow, dead or dying from the cold. Because he was not able to carry her back, he lay down beside her and died himself. It is where Oswald's mother lies, hence Osmotherley.

Cod Beck Reservoir at Osmotherley gets its name from Cod Beck, a small tributary of the River Swale. The beck derives its name from the Celtic word 'Coed', meaning woody. Just before Cod Beck reaches the reservoir is a picturesque location called Sheepwash.

Osmotherley is close to the western terminus of the Lyke Wake Walk. The official starting point is at the edge of the moors above the village, where there is a stone marker.

About 1½ miles from Osmotherley near the A19 is Mount Grace Priory. These beautiful ruins are situated at the foot of a steep wooded hill with a footpath leading up it into the village. This Carthusian religious house was founded around 1396.