(3156, 29 km E, Knox City)
Situated at the foot of the Dandenong Ranges, Ferntree Gully is a large, mainly residential suburb and the oldest settlement in the City of Knox. The Rev. James Clow acquired the Tirhantuan cattle run, which he renamed Corhanwarra, with a home station at Rowville in 1838. Two years later he established an outstation near the site of Fern Tree Gully. In 1853 Joseph Beilby purchased the outstation, renamed Mountain Station, and opened a sawmill. Although this venture was not successful, by the mid-1850s visitors to the district, including botanist Ferdinand von Mueller, noted the tall trees and marvelled at the tree ferns in the forest nearby. An early name for the locality was Lightwood Gully, but the Austrian landscape artist Eugène von Guérard, who visited and sketched in the area, called his 1857 painting Ferntree Gully in the Dandenong Ranges, depicting a clearing in the long gully of tree ferns that extended from the town into what is now the Dandenong Ranges National Park. It is thought that von Guérard's painting and etchings may have been responsible for the settlement's permanent name, which was changed to Ferntree Gully in the 1980s.
A number of timber-splitters established camps in the forest in the 1850s, and a hotel nearby made it a favourite spot for visitors from Melbourne who came to ride or walk through this 'gem among the jewels of nature's scenery'. Smaller landowners began to select land here in the 1860s, and in 1867 the Dandenong State Forest was reserved. After 1889, tourists visiting the area could travel by railway from Ringwood. In the same year, Fern Tree Gully Shire was split from the Shire of Berwick. After World War I some soldier settlers were based in the district, and as use of the motor car became more widespread and the train from Ringwood was electrified, day visiting increased.
In the 1930s some of the agricultural properties around Fern Tree Gully were cut into 20-acre blocks and bought by city people who built shacks and holiday homes. After World War II, Fern Tree Gully's permanent population began to grow, though orchards and market gardens remained in the surrounding districts. In 1963 the Shire of Fern Tree Gully was divided into the increasingly suburban Shire of Knox and the Shire of Sherbrooke, covering the remaining hill settlements of the Dandenongs.