The Ngooraialum tribe (about 200 strong) occupied the land around Murchison before being devastated and dispossessed by the arrival of Europeans.
The first white men in the district belonged to the party of explorer Thomas Mitchell which crossed the Goulburn River to the south at what became Mitchellstown. The first Europeans to pass through the future townsite were probably the drovers Joseph Hawdon and Charles Bonney who were overlanding sheep and cattle from Mitchellstown to Adelaide along the river system in 1838.
An Aboriginal Protectorate was transferred from Mitchellstown to Murchison in 1840 with a school established that year and a native police force in 1841. Squatters also began taking up local land in 1840.
In 1850 the Protectorate closed and French vigneron Ludovic Marie settled at Murchison, establishing vineyards. The site became a river crossing used by goldminers travelling between the Bendigo and Beechworth fields in the early 1850s. Marie therefore established an hotel and a punt service over the Goulburn River (in 1860 he helped start Chateau Tahbilk which is still in operation and surveyed Nagambie).
A township, the first in the Lower Goulburn Valley, began to develop around the crossing which was surveyed and named in 1854 after a Captain John Murchison. A period of fairly rapid growth ensued.
The first post office was built in 1855, a flour mill in 1858 and a Presbyterian Church and school in 1859. Land along the Goulburn was first opened for selection in 1865 with small landowners moving into the area in the 1870s.
A bridge replaced the punt service in 1871 and the first newspaper was established in 1873. A courthouse and mechanics institute were built in 1874.
The town benefitted greatly from the river trade which began with the arrival of the first paddlesteamer in 1875. At that time it had six hotels, a number of general stores, two flour mills, a post office, a sawmill, cordial factory, two blacksmiths and numerous other stores and services.
In 1878 the Murchison police station temporarily became the base for operations against the Kelly bushranging gang.
The railway reached Murchison East in 1880. The building of the Goulburn Weir from 1887-90 dropped the water level and so finished off the dying river trade. It also enabled irrigation projects to proceed in the area, thereby enabling the agricultural development of Shepparton, Tatura and Dhurringile as Murchison declined. Murchison East grew as a wheat depot on the branch line.
Between 1941 and 1947 some 4000 POWs were interned at Murchison. These were overwhelmingly German, Italian and Japanese POWS although the German officers were held at the Dhurringile mansion to the north of town. By 1942 the POW camp was employing 675 people, including 64 officers, to guard the prisoners.
The prisoners were used as a local source of labour. In 1943 the Italians and Japanese were used to pick fruit and the Italians were also used to cut wood. There was such a suspicion of the Germans that they were not allowed out of the camp. The camp was closed in 1947 and the main hall and clubrooms were removed to Murchison for the use of the RSL.
A truly spectacular event in the town's history was a meteor shower in 1969 when fragments of the rarest known type of meteorite fell over a wide area to the sound of explosions and blinding flashes of light. An American analyst discovered five chemical components found in the genes of all living matter, thereby increasing the possibility that life could develop or have developed elsewhere in the universe.