The area was first sighted by Europeans when pioneer naturalist, John Lhotsky, claimed, in 1834, to have seen, from the southern alps, a wide plain that the Aborigines called 'Omeo'. The indigenous peoples gathered quartz crystals, which they believed to possess supernatural qualities, from the Omeo River. The Omeo Highway follows the route they used for making contacts with other groups.
In 1835 George McKillop journeyed south from Monaro in New South Wales in search of new pastures. Another member of the party, James McFarlane, returned and founded what was probably the first cattle station in Victoria - Omeo B at what is now Benambra - which he sold in 1859. In his novel, Providence Ponds (1950), Stanley Porteous described the sight which greeted the original settlers:
The creek valleys narrowed, the forests closed in, until suddenly the Omeo basin fairly burst upon us - an open treeless plain, encircled by a rim of mountains upon which the peaks of Mount Tambo and the Three Brothers stood out distinctly....from its expanse came the shimmer of two lakes, one large, one tiny.'
John Pendergast arrived with his two brothers in 1836 or 1837 and established the Mount Leinster station. His family, Welsh immigrants who had settled for several generations in Ireland, are perhaps the most prominent pioneers of the district as the other early families soon moved further south. Pendergast's descendants still live at Pendergast's Court. A hut from the property, built in 1868, is now on display in Omeo's historical park in the centre of town.
Another early settler, John Hyland, settled west of Morass Creek but sold his run to Edward Cooke in 1841. Cooke bred thoroughbred horses for the army of India and shipped his cattle to Van Dieman's Land by way of Port Albert. He later sold Hinnomunjie station, from two Aboriginal words supposedly meaning 'no fish', and bought a run at Holey Plains, near today's Rosedale (see entry on Rosedale).
Angus McMillan rested in the Omeo vicinity in 1839 while following an Aboriginal track south to establish Numblamunjie station on behalf of Lachlan Macalister. The name was changed to Ensay in 1844 by Archibald Macleod, after an island off the coast of Scotland. McMillan used the station as a base for his extensive and ground-breaking explorations of Gippsland to the south.
During the 1840s squatters moving south into Gippsland used the area as a transit camp. However, the history of Omeo changed in 1851 when pioneering geologist, Reverend W.B. Clarke, while travelling south from Sydney on an expedition, discovered gold at Livingstone Creek, named after another member of McKillop's original party.
Two years later, when the population of Gippsland was little more than 300, there were 70 men, all living in 30 tents, panning for alluvial gold along Livingstone Creek. However, its isolation and the mountainous terrain ensured that development and population growth remained slow. Indicative of the difficulties was the fact that the 80-km journey from Ensay to Bairnsdale took four days on horseback. It was also a 9-day walk from the goldfields in the Ovens Valley. The population was still no more than 600 in 1863. Movement increased when a track was cut between Port Albert and Bairnsdale. An influx of miners occurred and new goldfields opened at Gibbo, Dry Gully, Cassilis, Dartmouth, Brookville, the Wombat and Stirling. The unruliness of the situation was not helped by the fact that no police were present at the site until 1858. Initially, the gold warden from Yackandandah only visited the field twice a year.
The goldrush reached its peak in the 1860s. Land settlement began in 1870 and Omeo was declared a municipality in 1872. A Wesleyan Church was opened in 1870, with the Roman Catholic Church following in 1874, the Church of England in 1892 and the Presbyterian Church in 1894. However, the stock of alluvial gold began to disappear and with it went many of the miners. Chinese people moved into the area to work the tailings and established market gardens.
A new boom began when reef gold was located at Sunnyside, Dry Gully, Glen Wills and Cassilis. Heavy machinery to work the reefs was hauled over the mountains by bullock teams and hydraulic dredges were in operation in the 1880s. However, this supply too was soon exhausted and the fields were abandoned by the start of the First World War. The town suffered earthquakes in 1885 and 1892 and considerable damage was caused by the infamous 'Black Friday' bushfires of 1939.
Although tin was mined at Glen Wills, Pilot Creek and Limestone it was cattle and sheep which came to the fore with the end of the gold days and cattle are still put out to pasture on the high plains every summer. The annual sale, each March, of "cold country" herefords is a major event on the local calendar. A rodeo is also held each year.
Incidents of the Omeo gold days provided source material for two landmark novelists of Australian literature, Henry Kingsley and Rolf Boldrewood. In The Hillyars and the Burtons (1865), Kingsley wrote of a number of diggers who died crossing the Great Dividing Range while returning from a futile rush from Beechworth to the Omeo area in 1854, having heard the tale that year at Beechworth from survivors of the trek. Boldrewood wrote of the lawlessness of the area in Robbery Under Arms (1888) and in Nevermore, where he dealt with the rustling of the Kelly Gang (the Lawless brothers in the novel), the murder of Cornelius Green (Con Gray) and the celebrated case of Tichborne, the heir to his family's title and estates in England, who disappeared in the goldfields.
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