Before the arrival of European settlers, the area was occupied for some 40,000 years by hunter-gatherers from three indigenous regional tribes, the Wurundjeri, Boonwurrung and Wathaurong. The first European settlement in Victoria was established in 1803 on Sullivan Bay, but this settlement was abandoned. It would be 30 years before another settlement was attempted: in 1835, the area that is now central Melbourne was explored by John Batman, a member of the Tasmanian Port Phillip Association, who negotiated a purchase of 600,000 acres (2,400 km2) with eight Wurundjeri elders. Batman selected a site on the northern bank of the Yarra River and returned to Launceston in Tasmania, but by the time a settlement party arrived to set up the village, a separate group organised and financed by John Pascoe Fawkner had already arrived aboard his ship the Enterprize and established a settlement at the same location. The two groups ultimately agreed to share the settlement. Batman's Treaty with the Aborigines was annulled by the New South Wales government. This meant the settlers were now trespassing on Crown land, but the government accepted the settlers' fait accompli and allowed the town (known at first by various names, including 'Batmania' and 'Dutergalla') to remain. In 1836 the settlement was named Melbourne after the then British Prime Minister William Lamb, 2nd Viscount Melbourne, and it was then declared a city by Queen Victoria in 1847.
The discovery of gold in Victoria in 1851 led to the Victorian gold rush, and the city grew rapidly. By 1865, it had overtaken Sydney as Australia's most populous city. This economic boom peaked during the 1880s and Melbourne had become the richest city in the world. The brash boosterism that typified the city ended in 1891 with a severe depression of the city's economy. At the time of Australia's federation in 1901, Melbourne became the seat of government of the federation, where it stayed until 1927, when it was moved to Canberra. During World War II, Melbourne industries thrived on wartime production and the city became Australia's leading manufacturing centre.
The eyes of the world were on the city when it hosted the 1956 Summer Olympics. Melbourne remained Australia's main business and financial centre until the late 1970s, when it began to lose this primacy to Sydney. In 1992 the government began to revive the city’s economy and tourism and at this time the Australian Grand Prix moved to Melbourne from Adelaide.