However, the term itself was coined in 1873 by Engineer-in-Chief of the Victorian Railways, Thomas Higinbotham, who suggested an "outer circle route".

[5] That problem was solved when the M&HBUR was purchased by the government in 1878, and the direct rail line from South Yarra to Oakleigh was opened the next year.

When opened the line was 10.3 miles (16.6 km) in length, and had 11 stations, all provided with twin platforms and crossing loops.

The northern section of the line, starting at East Camberwell, has been converted into the Outer Circle Trail, a walking and bicycle path.

[20] The track between Fairfield station and the northern bank of the Yarra River came into use from 1919 as the APM Siding,[20] serving a paper mill built on the site.

[21] In 2014, a documentary, Melbourne's Forgotten Railway – The Outer Circle,[22] was produced by a Melbourne-based media production team, led by Ron Killeen and Andrew McColm.