Prior to European settlement the area is thought to have been occupied by the Youngillim or Wuywurrung Aborigines. Explorers Hamilton Hume and William Hovell passed through the area. In the late 1830s the Hunter and Watson Pastoral Company leased vast amounts of the Mansfield Valley and their employees were probably the first Europeans in the area. The first run was established in 1839. The run was subdivided into seven smaller stations in 1842. The father of Dame Nellie Melba established a lime quarry on one of these allotments.
Mansfield began in 1846 as a designated stock route camp. The townsite was surveyed and lots sold in 1851. The breadth of the main street was to enable bullock teams to do U-turns. The settlement was named after early European settler Edward Mansfield and developed as a commercial centre for the many small goldmining settlements established to the south in the 1850s.
After the initial rush Mansfield settled down to become a service centre to a grazing, farming and timbergetting community. One of the timbergetters who worked in the area for two or three years, following his release from prison in 1874, was Ned Kelly, Australia's most notorious bushranger and perhaps its best-known figure.
In 1878, after an incident at the Kelly home (see entry on Glenrowan) the 22-year-old Ned and his younger brother Dan went into hiding in the Wombat Ranges just to the north-east of Mansfield. Two police parties (one from Mansfield and one from Benalla) headed into the mountains to capture them. At Stringybark Creek (near Tolmie), on October 25, the two brothers, with two visiting companions (Steve Hart and Joe Byrne), surprised constables Lonigan and McIntyre at their camp. Lonigan had had a previous run-in with Ned at Benalla. Ned called for them to bail up. The unarmed McIntyre complied but Lonigan jumped behind a log. When he raised his head to fire he was shot by Kelly and died almost immediately.
Two other constables from the party were out searching for the brothers. McIntyre was advised that if he instructed his colleagues to surrender when they returned they would be allowed to return to Mansfield after donating their horses and guns.
As constables Scanlon and Kennedy rode into camp, McIntyre complied but his actions were taken as a jest. Kelly then appeared, demanding their compliance. Kennedy leapt from his horse firing. After getting off one shot, Scanlon was killed by Kelly before he could dismount. As Kennedy ran from tree to tree for cover he was shot in the armpit. A second bullet pierced him close to his heart then Kelly, who had fired both shots, advanced and shot him directly through the heart which, he said, was to prevent further suffering before an inevitable death.
McIntyre escaped during the fracas to spread the news. All four constables were of Irish descent (like the Kellys) and all were considered outstanding members of the force. The news shocked the country and caused considerable concern. As a consequence, the gang members were outlawed with 500-pound rewards offered for each man, alive or dead (for the rest of the Kelly story see the entries on Glenrowan, Euroa and Jerilderie).
Mansfield's annual events include a Harvest Festival on the Labour Day long weekend in March, a Hot Air Balloon Festival in February-March, a Mountain Country Festival in late October or early November (which includes the Great Mountain Race for cross-country horseriders) and the Agricultural Show on the third Sunday of November.