The name refers to the bank of Birrarung, the 'river of mists', in the Woiwurrung language of the Wurundjeri people, the Indigenous inhabitants at the time of European colonisation of the Melbourne area.

The first rail line crossed the area in 1859 and railways eventually occupied most of the parkland between Melbourne's central business district (CBD) and the Yarra River.

At the 19th century's end, these impacts were outstripped by reconstruction of the Yarra River itself, which was straightened, widened and deepened, with tree-lined avenues formed along the built-up banks.

The creation of Birrarung Marr resulted from the reorganisation of infrastructure and land uses near Federation Square, including clearance of the Jolimont railyards, and diversion of Batman Avenue away from the river bank to connect to Exhibition Street.

These works enabled reclamation of land from the former rail yards and roadway to create Melbourne's first significant new inner city park in one hundred years.

The project was a joint venture by the City of Melbourne, which provided A$15.6 million to design and build the park, and the State Government of Victoria, which funded the railway rationalisation and clearance of the site.

The initial schemes for Birrarung Marr proposed a 'festival park', a largely commercial venue supporting the State's use of sporting and cultural events such as the Australian Grand Prix to position Melbourne in the international marketplace.

(The upper terrace was intended to link to the top deck of the Federation Square carpark, which was ultimately not built to the agreed brief although its extension is now being considered.)

The massive terraces were formed on the level railyard site using spoil generated by works on the adjoining rail lines, Federation Square, and construction of the nearby Melbourne Arena.

The layout of the park emphasises lines of sight to various Melbourne landmarks such as the spires of the Victorian Arts Centre and St Paul's Cathedral and the Rialto office tower.

The concept plan for Birrarung Marr was prepared by the City of Melbourne, with in-house landscape architects Ronald Jones and Helena Piha as principal designers.

A long ramping footbridge within the park, designed by architects Swaney Draper, links the three terrace levels and provides disabled access.

The result is not unlike a collection of church bells, however they are spread through an open space rather than being confined to a tower, allowing people to walk between them.

This provides pedestrian access between the middle terrace of Birrarung Marr over the CityLink toll road and railways to the vicinity of the Melbourne Cricket Ground.