In 1989, Don Macreadie wrote that Paweł Strzelecki named Traralgon after Taralga, the hometown of Charlie Tarra, but the statement lacks evidence.

[10][11] Traralgon is situated on the traditional lands of the Indigenous Gunai/Kurnai nation, which includes the lands of the Braiakaulung clan of Bunjil Kraura, who lived to the north of Latrobe River (called Durt'yowan in Gunai language), as well as the clan of Woollum-Woollum, who lived on the hills to the south of the river and were more affiliated with the Brataualung people.

[12][13] Gunai/Kurnai people manufactured stone tools, as long as 5,000 years ago, from silcrete quarries in the Haunted Hills, west of Morwell.

[14] The Gippsland region was inhabited by the Gunai/Kurnai people for a period in excess of 20,000 years, according to evidence of occupation found at the New Guinea II cave near Buchan, Victoria.

[20] The team's rations were reduced to a slice of bacon and a biscuit per day, but Tarra hunted for animals to end their hunger.

[21] They traversed the headwaters of Morwell River, before making a difficult journey across the heavily forested mountain range.

[14] In June 1840, a party consisting of Tarra, Riley, John Rutledge and Shoalhaven Indigenous man John Pigeon went on a second expedition to retrieve the lost horses and managed to retrieve one, by travelling through the mountains of West Gippsland, across a path that would roughly trace the present-day Princes Highway.

A third expedition was made from Port Albert to Latrobe Valley in March 1841 that included William Brodribb, Alexander Kinghorne, Norman McLeod and Kirsopp with Tarra as their guide.

The president of the Shire of Traralgon, Cr Clem Little met and welcomed the Queen, who was flown by the Royal Australian Air Force from Sale.

[29] Further development resulted from the expansion of the power generation industry following World War II, particularly through the now defunct State Electricity Commission of Victoria.

An Australian Securities & Investments Commission information processing centre was established in the early 1990s, at the time employing around 400 people.

Traralgon, with a more diversified economy, suffered to a lesser extent than the neighbouring towns of Morwell and Moe both of which relied almost exclusively on the power stations for their livelihood.

Traralgon grew strongly in the mid 2000s, with a figure of 2.7% making it the largest and fastest growing city in the Latrobe Valley.

The Traralgon Creek runs through the city's centre and its green belt separates its eastern and western suburban areas.

Along with electricity production, Traralgon benefits from the mining for oil and natural gas in the nearby Bass Strait fields.

A significant forestry industry operates including logging of both plantation and natural forest timber, The largest paper mill in Australia is located nearby in Maryvale and provides local employment for over 2,000 people.

In addition Traralgon has the Latrobe Special Developmental School catering for students from 4.5 to 18 years of age with an intellectual and physical disability.

[46] The Latrobe Valley Cycling club hold road and track racing events on most weeks throughout the year.

The entertainment precinct which spans Kay, Grey and Franklin Streets attracts people from surrounding towns to several nightclubs, bars and restaurants located there.

The weekly Latrobe Valley Express newspaper is delivered to all homes on Wednesday nights, in Traralgon, Morwell and Moe.

The area was the first in Australia to receive its own regional television station, GLV-10 Gippsland (now Southern Cross 10), when it launched on 9 December 1961.

Television transmissions from Mount Dandenong for the Melbourne market (Seven, Nine and Ten) can also be received in digital in Traralgon with a suitable roof-top antenna.

[48] The Princes Highway runs through the city and close to the CBD which received heavy regional traffic (although a Traralgon Bypass road is undergoing planning[49]).

[50] Victoria's electronic ticketing system, Myki, was implemented on rail services between Traralgon and Melbourne on 8 July 2013.

Latrobe Valley Airport is located close to Traralgon in nearby Morwell and provides general aviation.

An exception is the 63-kilometre-long Gippsland Plains Rail Trail which connects Traralgon to Stratford via Cowwarr, Heyfield, Tinamba and Maffra.

A new cycling and walking path was opened in 2020 between Traralgon and Morwell and with a connection to the Latrobe Regional Hospital (LRH).