(3140, 36 km E, Yarra Ranges Shire)
In the 1850s a mill on the site of the present artificial lake just out of Lilydale township was built to service the wheat farmers of the district that was originally known as Running Creek (now Olinda Creek). The mill was reputed to have been one of the first flour mills in Victoria. Parts of the mill, saved from immersion in the lake by pressure from the Lilydale and District Historical Society, may be seen at the lake site.
The township of Lilydale was surveyed in 1860. At that time Brushy Creek was the nearest settlement. By 1861 there was a post office, a blacksmith's shop and a store in the town, and extant 19th-century buildings include the 1862 Lilydale Hotel, original council chamber (1888), and Athenaeum Free Library and Mechanics Institute.
Three of the town's privately owned 19th-century buildings are The Towers (1882), The Briars owned originally by explorer William Carr Boyd (1852-1925) who lived for some time in Lilydale and after whom Carr-Boyd Range in Western Australia was named, and Cooring Yering, a 35-room mansion built in 1884 for Colonel Hutton (founder of Hutton's smallgoods).
Lillydale is an official alternative version of the place name, the township commonly spelt Lilydale, the former shire Lillydale. The town was reputedly named, by John Hardy who surveyed it, from a sentimental song of the period called Lilly Dale , which he had heard sung by one of his chain men. An alternative suggestion is that it was named after Lilly de Castella, wife of one of the early pioneers.
The town is the terminus of the Lilydale railway line from Melbourne. It is also the beginning of the Warburton Trail, which follows the route of the Lilydale-Warburton railway line built in 1901 and closed in 1964. The trail is now a walking track in sections of approximately 5 km between each of the old station sites. Commencing just out of the town on the Maroondah Highway, the track is open through to Warburton and is of interest to bird watchers as well as walkers. Opera singer Dame Nellie Melba and her father, builder David Mitchell, are both buried in the oldest section of the local cemetery.