For the colonists, Victoria did not get off to an auspicious start: there was an unsuccessful attempt at settlement in the Port Phillip Bay area in 1803 but Van Diemen's Land (Tasmania) across the Bass Strait was deemed more suitable. It was in fact from Launceston that Port Phillip Bay was eventually settled, in 1834; other Tasmanians soon followed and Melbourne was established. This occupation was in defiance of a British government edict forbidding settlement in the territory, then part of New South Wales, but squatting had already begun the previous year when Edward Henty arrived with his stock to establish the first white settlement in Portland on the southwest coast. A pattern was created of land-hungry settlers - generally already men of means - responding to Britain's demand for wool, so that during the 1840s and 1850s what was to become Victoria evolved into a prosperous pastoral community with squatters extending huge grazing runs.

From the beginning, the Koories fought against the invasion of their land: 1836 saw the start of the Black War , as it has been called, a bloody guerrilla struggle against the settlers. By 1850, however, the Aborigines had been decimated - by disease as well as war - and felt defeated, too, by the apparently endless flood of invaders; their population is believed to have declined from around 15,500 to just 2300.

By 1851 the white population of the area was large and confident enough to demand separation from New South Wales, achieved, by a stroke of luck, just nine days before gold was discovered in the new colony. The rich goldfields of Ballarat, Bendigo and Castlemaine brought an influx of hopeful migrants from around the world. More gold came from Victoria over the next thirty years than was extracted during the celebrated Californian goldrush, transforming Victoria from a pastoral backwater into Australia's financial capital. Following federation in 1901, Melbourne was even the political capital - a title it retained until Canberra became fully operational in 1927.