A TINY post office that keeps a small town ticking has been recognised as the second-best in the entire state, but not very long ago its future hung in the balance.

When the Killarney Post Office went up for sale in early 2016, the town feared it might lose a vital service.

Killarney resident Colleen Sandall said losing the post office could have had ramifications for the wider local economy.

"It would have been a big loss, if people had to go into Warwick to do their post and banking they would have shopped there and the town would have lost a lot of business,” she said.

"When you lose something from a small town you lose other things as well that feed off it, so it is vital that small towns like us keep all those things.”

So when the in-store Westpac branch at the Killarney Cooperative closed down around the same time, the town turned a devastating loss into an opportunity to keep services up and running.

Having the Co-op purchase the post office meant Killarney residents could still do their banking, postage and pay their bills without having to travel all the way into Warwick.

But as the "life-blood” of the community, the post office is much more than just an administration building.

"I can go in there and spend hours talking and chatting to people,” Mrs Sandall said.

"It's where you get all your information and find out what has been happening around town.”

She wasn't the slightest bit surprised the little post office had impressed the higher powers with its dedication to customers and excellent performance standards.

"They are so lovely and helpful and they really are there for the community and know everyone by name,” she said.

Killarney Post Office general manager Marissa Costello and her staff accepted the award for best Licensed Post Office in Western Queensland on Saturday.

"The staff really go above and beyond so it was a great reward for hard work,” Mrs Costello said.

Killarney was also awarded second place in the state based on key performance indicators.

But Mrs Costello said the real win was keeping an integral service in town.

"If you didn't have this service it would make it extremely difficult particularly for your older population here because we don't have any banks left in town.”