In 1836 an early exploration party led by Major Mitchell on his return journey from Portland to Sydney crossed the Loddon at Newstead and passed south of Mount Tarrangower. It is believed that he passed through the Maldon area as his initials were said to be found carved on a tree in the Nuggetty Ranges.

Settlement of the area followed soon after, with the region being explored in 1840 with the intention of establishing an aboriginal settlement. The aboriginal settlement was established on the Loddon near Mount Tarrangower in 1841. A Pastoral Run Licence was later issued for the 100,000 acre property Tarrengower in 1840 and one for the 61,200 acre property Cairn Curran in 1842.

Gold was found on the Cairn Curran property at the end of 1853 in the region that was first called Tarrangower and eventually to be called Maldon. A Polish Captain Mechosk and a group of prospectors are credited with finding the first gold at the base of Mount Tarrangower in Long Gully, near the Royal Hotel. The subsequent rush to the area increased the population to an estimated 20,000. Later finds in Eaglehawk and Porcupine Flat increased the population to an estimated 40,000. Lack of water made living difficult and the washing of the gold had to wait until it rained, or the dirt was transported to the Loddon River or Muckleford Creek. The initial finds of alluvial gold petered out and two years after the initial find most miners had moved away.

Initially the finds of gold bearing quartz were ignored as the means of extracting the gold proved too difficult, but with the alluvial rush over, miners now turned to investigating the reefs that had been discovered and looked for ways of crushing the quartz to extract the gold. As the tunnels became longer, the shafts became deeper, and the cost of mining and processing the quartz became greater, the mining passed from small groups of miners to large companies. This changed the appearance of the region from a tent and shanty town with thousands of shafts and their heaps of dirt, to a scene with tall chimneys, poppet heads, steam generators, batteries and the large mullock heaps. This reef mining went to great depths, nearly 700 metres in the case of the South German mine when underground water flooded the mine. The richest of the mines was the Nuggety which was only at a depth of 75 metres when the reef ended.

In all, there were approximately 40 mines in the region that produced over 2 million ounces of gold, that is over $600 million at today's prices. This is the official recorded production, the total gold production was impossible to record. Now, Maldon only has one operational mine, currently closed due to the low gold prices. The district is still believed to have potential gold deposits that could yield more gold than was ever taken out of the area.

The wealth of this new Tarrangower settlement decided the government to establish a town and an initial site to the north of the existing town was surveyed by John Templeton in 1854. The site chosen was not popular with the residents and a later survey by Thomas Adair in 1856 included the irregular street pattern from Spring Street to Camp Street with a regular grid pattern from Camp Street to Franklin Street. The intention of Adair was that the new town, which he named Maldon, should be located in the section with the regular layout, but the local preference was to make the junction of High and Main Streets the town centre.

Maldon was declared a municipality in 1858, and the main growth of the town occurred from this time with the construction of a court house, a hospital, a market building, two bank buildings and ten churches. Later buildings to be constructed were the State School, two of the largest stores, Warnock's Beehive Store and Dabb and Co's Store, the Post Office and the Temperance Hall. In addition to these buildings were the sixty hotels that operated at one time, the three theatres, billiard parlours, skittle alleys, cafes and accommodation houses. At this time Maldon was ranked as the eighth largest town in the State.

By the end of the First World War the yield of gold started to peter out and mines started to close. The North British Mine, the last of the large mines, closed in 1926. From this time, with the mines closing and with the depression, people started to leave Maldon and half the houses were moved to other towns. Some of the residents remained and the population dropped to nearly a thousand but the town continued on, virtually unchanged.

In 1964, a study by the School of Architecture of the University of Melbourne led in 1965 to the National Trust of Australia giving the first ever classification of "a notable town" to Maldon not because of the presence of any classical architecture but for its unspoilt historic character. The town is now protected, with building and renovating in the historic precinct controlled by strict planning controls.