One of the first accounts of the Dunolly Gold Rush was recorded by the Bendigo Advertiser on 3 July 1857 that estimated the population at 12,000.

The location of the township itself moved four times before the 1856 rush, further adding to the confusion of its early history.

The modern town is the 5th location, and was founded in July 1856 with the previous resettlements driven by further discoveries of gold leads.

[5] One of the largest natural gold nuggets ever found, the legendary "Welcome Stranger", was discovered in nearby Moliagul township.

There is a local museum on Broadway which has a large collection of historic photographs, goldfields implements, replicas of gold nuggets, ladies fashions, needlework, and guns.