This institution was established in 1935 in East Melbourne by the Sisters of Mercy, a Catholic religious order involved in health care since providing extra nurses during the 1919 influenza epidemic. They intended to establish a public hospital but were refused permission by the State Government, which was encouraging churches, lodges and friendly societies to set up intermediate, or non-profit private hospitals, for fee-paying patients.
The Mercy School of Nursing was established in 1936. After much fundraising, the public Mercy Maternity Hospital was opened in 1971 on land adjoining the Mercy Private, changing its name to the Mercy Hospital for Women in 1991 to reflect the range of women's health care beyond obstetrics.
In 1996 Mercy Health and Aged Care was formed to manage the several public and private Mercy-run institutions and St Vincent's Private Hospital. Two years later Mercy Private entered a joint venture with St Vincent's Private Hospital, becoming St Vincent's & Mercy Private Hospital, Australia's largest private Catholic hospital.
In 2005 the Mercy Hospital for Women relocated to Heidelberg as part of a new Austin & Mercy Hospital for Women, providing new and complete public specialist and general services to Melbourne's growing north-east.