There are various translations as to what Mudgee means including "resting place", "contented", "nest in the hills" as well as "friend or mate" which the latter coincides with the Wiradjuri word "mudyi".

[8][9][10] Nearby places include Lue (Loowee, 'a chain of waterholes'); Gulgong ('a gully'); Wollar ('a rock water hole'); Menah ('flat country'); Eurunderee ('a local tree'); Guntawang ('a peaceful place'), Cooyal ('dry country'); Wilbertree ('a long switch'); Gooree ('native chasing live animal'); Burrendong ('darker than usual').

Both Blackman and Lawson found the site to be an Aboriginal settlement or bimmel inhabited by around 100 people who called the area Mudgee or Mujjee.

[3] The violence in the region worsened in June 1824, when Theophilus Chamberlain, who was the Coxes' superintendent of their Mudgee property holdings, led a number of punitive expeditions against the local Aboriginal people.

A skirmish at Guntawang to the north of Mudgee resulted in some settlers being killed, with around 70 or more Aboriginal people dying in follow up raids.

Martial law was declared by Governor Thomas Brisbane in August 1824, leading to further killings of the Wiradjuri people in the Mudgee area.

Descendants and workers of the Coxes later described this period as one where "an immense number of natives, men, women and children were slaughtered" and "the bodies of the blacks were piled together and burnt...like old tar barrels".

The violence forced the Coxes to abandon Guntawang, and relieving Chamberlain of his duties, they shifted their enterprise to nearby Dabee.

[13][14][15][3] The Cox family remained prominent landholders around Mudgee for many decades, owning the Dabee, Menah and Burrundulla properties.

Although Hoddle was the first surveyor in the region, marking out the boundaries of Putta Bucca and Bombira, by the time the village was gazetted, he had already left the district to become leader of the Port Phillip Survey.

While no gold was found in Mudgee itself, the town is central to the goldfields of Gulgong, Hill End and Windeyer, and grew rapidly as a result.

The National Trust of Australia has a number of these buildings registered including the Mudgee Museum (formerly the Colonial Inn),[20] the Catholic presbytery, the court house, the police station and the Anglican Church.

[30] Additionally, in the A-League, the Western Sydney based Western Sydney Wanderers have chosen to take their Community Round match to Mudgee's Glen Willow Regional Sports Stadium, as part of their new Regional Strategy,[31] In 2014, the local council found itself involved in a statewide corruption investigation when officers of the Independent Commission Against Corruption (New South Wales) raided the local council's offices.

It is also heavily dependent on several major mines in the surrounding area[34] and fly-in fly-out (FIFO) miners who live in the town but work elsewhere.

Other rural produce includes cattle, sheep, wheat, alfalfa, olives, fruit, tomatoes, sweetcorn, honey, alpacas and dairy products.

Winters are relatively cold, with frosty mornings and mostly sunny days, interspersed with periods of rain and, rarely, snow; Mudgee's heaviest snowfall on record was 1 ft 10 in (56 cm) on 5 July 1900.