The area where Preston now resides was first surveyed by Robert Hoddle in 1837 for sub-division. Parcels of land between 300 acres (in the southern area) and over 1000 acres (in the north) were all sold during the Melbourne 'land boom' sales of the late 1830s.
The first permanent white resident was Samuel Jeffrey in 1841 and from him the area's early name was Irishtown.
In 1850, Edward Wood, a settler from Sussex, England, opened a store at the corner of High Street and Wood Street which was also the district's first post office. Meeting at Wood's store, members of the Ebenezer Church, Particular Baptist from Brighton, England met to change the name. They wanted to name the town after their former home in Sussex, but Brighton was already taken. Instead they named it after Preston, a small village nearby, where the church members had happy annual outings.
Preston Post Office opened on 1 March 1856.
The first church was accompanied by a growing number of hotels and other stores, which had emerged some 2 kilometres south of Wood's store at the junction of Plenty Road and High Street, the latter of which served as a route to Sydney. Throughout the 1880s the area between Wood's Store and the junction would be known as "Gowerville".
In April 1939, Mr. Vara Tidd, aged 91 years, who had lived in Preston since arriving with his family as a seven-year-old, recalled the early settlement:
"He retains a wonderfully clear memory of the early days of Preston when the settlement was known as Irishtown. He can recall the camp of aborigines on the banks of the Darebin Creek and the old toll gate at Wood street Preston as well as the flour mill in the same street with Emery's pottery behind the mill. Transport in those days was primitive and limited. The waggonette left the old Royal Mall Hotel In Bourke street."
1854 saw the establishment of the area's first primary schools, an Anglican and a Wesleyan school. The first state school opened in 1866 to the east of the junction settlement, but was later joined by another, the Tyler Street School which had opened in 1875, north-east of Wood's store. The two denominational schools closed shortly before the Tyler Street School had opened.
During its formative years, Preston was heavily reliant on an abundance of fertile land for farming, dairying and market gardens. Areas that were not productive however, yielded clay for pottery and bricks. The 1860s saw the development of Preston's industrial capacity, with a bacon-curing factory opening in 1862, followed by a tannery in 1865. These original establishments would be followed by several larger factories, including Huttons Hams and Bacons and Zwar's Parkside Tannery.
By the 1860s, the area had a population of around 200, and five hotels, three of which survive: The Preston Hotel (1856), The Junction (1861), and nearby Reservoir's Rose Shamrock (1854)
1889 saw the opening of the first rail line between Collingwood and Whittlesea, passing through Preston. The new line provided stations at Bell Street, Regent Street, Reservoir and centrally in Preston.
Throughout the 1880s, Preston with its abundance of land and newly built rail stations was marketed as a residential area, capable of supporting 20,000 inhabitants. Between 1887 and 1891 Preston's population nearly doubled from 2,000 to 3,600. The majority of residential development took place within the corridor contained by Plenty Road and High Street, however there was also limited development in the west of the town, along Gilbert Road. These areas would remain areas of growth well into the 20th Century.
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