Created around 1965, mainly to accommodate HAL employees, Sunabeda is a planned and organized township. It is situated around 1,000 meters above sea level. Prior to its creation, this place was known as Old Sunabeda which was occupied by native tribal community. About a thousand tribals were displaced and rendered homeless to give way for the HAL factory (Source: Everybody loves a good drought: "Sainath"). Even though the factory was made with Russian collaboration, the township and the factory buildings were executed by state engineers of Odisha. The project was named Aero Engine Factory Project. The residential colony is called AEF Colony with a Chief Engineer responsible towards it.

Sunabeda in those days was very inhospitable due to its extreme weather and malaria. No civic amenities were available such as schools, hospitals etc. Post 1971 war a shelter camp for the Bangladeshi refugees was constructed which was Sunabeda–3, that's predominantly comprises Bengali people. The Odisha Small Industries Corporation established the Odisha Timber and Engineering Works adjacent to NH 26. Most Bengali people joined here as carpenters. When the Kolab dam was constructed a catchment formed around Sunabeda in the form of a big lake. Few of these Bengali people took to fishing and today Sunabeda is a centre for making fishing boats and nets for which fishermen from as far as Malkangiri come to Sunabeda for buying their provisions.

There was little growth in Sunabeda and on the other hand the hustle and bustle gradually started dwindling as the AEF project closed after commencement of production in HAL. Similarly fresh recruitment in HAL stopped after a while and people started retiring and the post remained vacant as the MIG series of aircraft was losing out to new series of aircraft. In late eighties setting up of the NAD and NALCO in Damanjodi kept the overall situation alive in Sunabeda and Semiliguda. Things started looking brighter after SU-30 came up with a new division in HAL. Subsequent coming of CRPF COBRA Battalion HQ, Central University, IGNOU are hoped to provide some growth to the area.