The only hospital in the Southern Hemisphere devoted exclusively to the specialities of ophthalmology and otolaryngology, the Eye and Ear Hospital is one of a small number of such hospitals in the world. It is the third oldest public hospital in Melbourne and was established by Irish-born surgeon Andrew Sexton Gray in rented premises at 2 Albert Street, East Melbourne, in 1863.
In its first decade the hospital was a 'movable institution' based at a number of East Melbourne sites. The hospital operated on a voluntary payment basis, with patients expected to help with the costs of medicines and accommodation but not doctor's fees, those in poverty being treated free of charge. On 26 December 1866 it became a public institution with a nine-member committee of management and a substantial government grant. The hospital finally found a permanent home when the government granted it a site commonly known as Tank Reserve on Eastern Hill, East Melbourne. The first hospital on this site was completed in 1881 and extended in 1883.
Over the years the hospital has continued to expand with extensions and new buildings. In 1960 the 'Royal' prefix was added to the hospital's title, and in 1963 it was granted a coat of arms (with the motto 'Teaching Healing Research'). The hospital won international renown in 1985 for its medical research into the development of the Bionic Ear. In 1992 it was the first teaching hospital in Australia to be awarded the prestigious Five Year Award for Excellence by the Australian Council on Healthcare Standards. The hospital's board of management was abolished in 1995, the hospital eventually coming under the control of the Inner and Eastern Healthcare Network.