The village name is Anglo Saxon in origin, and means 'oak clearing'. In the Domesday Book of 1086 it was recorded as Achelai, and was owned by a young lady, who had reputedly been given the village by Godic the Sheriff for teaching his daughter to work gold embroidery.
Anciently Oakley was at the centre of the Bernwood Forest. Though little remains of this forest today it is from the forest that Oakley takes its name. At one time the village was owned by the Duke of Marlborough.
There were once four hamlets that stood within the parish of Oakley. Brill and Boarstall are now parishes in their own right. The hamlet of Studley was, many years ago, annexed to nearby Horton in Oxfordshire, to become Horton-cum-Studley. The final hamlet of Addingrave now no longer exists, as the chapel has long since fallen into disrepair.