The 'capital' of the Orkney Islands, Kirkwall stands on a narrow neck of land that divides east and west Mainland. It was established by the Norse in the 11th Century on the site of a natural harbour and a century later in 1137 gained city status with the founding of the Cathedral of St. Magnus. Close to the cathedral are the Bishop's Palace, a 16th century reconstruction of a 12th century building, and the 16th-century Earl's Palace, the former home of the Earls of Orkney. Kirkwall was made a royal burgh by King James III in 1486, seventeen years after the Orkney and Shetland Islands passed into Scottish possession and today is a centre for administration, knitwear and craft production, fishing, food processing, a source for mineral water and the distilling of whisky - the Highland Park Distillery being the northernmost distillery in the UK. Amongst the burgh's local events are the St Magnus Festival, which has been held in Kirkwall every June since 1976, and The Ba', a football game that takes place in the main street on New Year's Day.
Tourism is an important industry here, with the busiest cruise terminal in Britain located a mile (1.8 km) to the northwest at Hatston.