Merlo built his ranch-house on high ground overlooking the nearby Camino Real del Oeste, a road that linked Buenos Aires with Lima, the capital of the Viceroyalty of Peru.

The town was isolated from the main transportation and communication routes when the nearby road Camino de los Gaona bypassed Merlo three kilometers north after the landlord Juan Marquez built a wooden bridge in his estates over the Reconquista River in 1773.

In order to reach Merlo the line would pass through the estancia belonged to Manuela Calderón de Pearson and which was managed by her son Juan Dillon, who saw the opportunity to make huge profits by selling out parts of the family's estate .

In 1859 Juan Dillon commissioned the famous architect and engineer Pedro Benoit to design the layout of the new town, organizing it on a rectangular grid of streets and blocks.

In the second half of the 20th century, Merlo experienced an important influx of immigrants from the provinces and the old town sprawled over the countryside and the farms were replaced by housing for residents with a lower range of incomes.

The Church of Nuestra Señora de la Merced (Our Lady of Mercy) was consecrated in 1864 and it was built in the same spot where the old Merlo's chapel stood.

The building was also designed by Pedro Benoit —prominent neighbor of Merlo and recognized member of the Argentine freemasonry— and built by the Spanish master builder Antonio Ayerbe.

He was appointed as chaplain for the Irish community in Merlo and years later he was elected senator in the legislature of Buenos Aires and founder of the newspaper The Southern Cross, which continues in print to this day.