Located between Swanston and Russell streets, Rainbow Alley extends north off Little Collins Street. It was named pre-1856 after the nearby Rainbow Hotel, which was situated at the corner of Swanston and Little Collins Streets.
In 1860, cider manufacturer George Hopkins ran his business from this site. However, by the late nineteenth century, Rainbow Alley had become a place of filth and nuisance. The Inspector of Nuisances and the Board of Health at the City of Melbourne received numerous complaints during this time including a letter from watch, clock and jewellery manufacturers Denis Bros, whose business on Bourke Street backed onto this lane. They wrote on 19 March 1894 of 'a most dangerous nuisance' in which a certain oyster saloon on Swanston Street made a habit of bringing shells and offal into the lane two or three mornings a week, leaving a filthy stench. Although the Inspector of Nuisances found the premises to be clean upon his visit on 28 March 1894, he instead identified another nuisance, an overflowing pipe from the Royal Mail Hotel situated at the corner of Swanston and Bourke streets.
Upon receipt of similar complaints in July that year, this time from the Australasian Temperance and General Mutual Life Assurance Society, it was determined by Inspector Richard Bullons that this was 'one of the right-of-ways that [is] commonly used at night as a place of convenience'.