Proposals for a new general hospital, long resisted by the Melbourne Hospital medical establishment, were revived in the wake of the 1868 assassination attempt in Sydney on HRH Prince Alfred, Duke of Edinburgh. The Alfred Hospital was constructed on a 15-acre (6 ha) reserve at Commercial Road, Prahran, in 1870 to the pavilion design of architect Charles Webb. James Service, later Premier of Victoria, and the surgeon, Dr John Blair, were to become principal founders and Haldane Colquhoun Turriff first matron.
One of the six trained Nightingale nurses sent to the Sydney Infirmary from St Thomas's Hospital, Turriff set high standards of patient care, but her unreliable temper made life hazardous for colleagues. It was her untrained successor, Mrs Strong, who developed the Alfred Hospital Nurse Training School launched by Blair on 1 December 1880.
The hospital committee granted the head of the nursing division professional status from the outset. It also pioneered the concept of opening the hospital to paying patients, and during the 1880s permitted relatively early introduction into general hospital practice of several clinical specialities. It also hosted the now autonomous Baker Medical Research Institute, funded initially by Thomas Baker and his family in 1926.
The Alfred introduced clinical training for medical students in 1888, enabling Melbourne's first female medical undergraduates to obtain essential clinical experience denied them elsewhere. The Clinical School was abandoned in 1894 as the distance from the University of Melbourne made student numbers difficult to maintain. It was revived in 1910 but the problem remained until 1961 when the school affiliated with the Faculty of Medicine at Monash University.
The assumption of management of the Caulfield Convalescent Hospital in 1948, together with the Alfred's status as an accident and emergency base, teaching hospital and centre for clinical research, has ensured its centrality to government health service policies as these change in response to demographic and budgetary demand.