The name Mudgee is derived from the Wiradjuri term Moothi meaning "Nest in the Hills" or "mou-
George and Henry Cox, sons of William Cox, were the first settlers on the Cudgegong River when they established the Menah run, 3 kilometres north of the current town. The European settlers were soon in conflict with the Wiradjuri over a range of issues including killing of livestock and animals such as kangaroos and possums which were major food sources for the Wiradjuri. Martial law was declared in 1824 leading to a significant reduction in the population of the Wiradjuri.
While the site of Mudgee was surveyed for a village in 1823, Menah was the original settlement having a police station and a lock up by 1833. Robert Hoddle designed the village which was gazetted in 1838. John Blackman built a slab hut, the first dwelling in Mudgee and its general store. By 1841, there were 36 dwellings, three hotels, a hospital, a post office, two stores and an Anglican church. The police station moved from Menah in the mid-
 History 1850 to present
In 1851, the population of Mudgee was 200. However, the population exploded as the discovery of gold in nearby Hargraves by Edward Hargraves led to a gold rush in New South Wales. While no gold was found in Mudgee itself, the town prospered as gold was discovered in nearby towns such as Gulgong, Hill End and Windeyer temporarily reached populations of 20,000. Mudgee was a centre for the local goldfields and grew rapidly as a result.
Mudgee was declared as a municipality in 1860 making it the second oldest municipality west of the Great Dividing Range with a population of 1500 in 1861. A public school was built in the 1850s together with the present Catholic and Anglican churches and a Methodist and Presbyterian church. A new police station, courthouse, Mechanics' Institute and a town hall were built in the 1860s. There were four coach factories operating in Mudgee to cater for the demand of the nearby goldfields. The National Trust of Australia has a number of these buildings registered including the Mudgee Museum (formerly the Colonial Inn), the Catholic presbytery, the court house, the police station and the Anglican Church. On 1 June 1861 the Electric Telegraph system arrived and was opened for messages to be transmitted and received at the Telegraph office.
One of the gold miners attracted to the Mudgee district was Niels Peter Larsen who married Louisa Albury in Mudgee in 1866. They had a child, leading Australian poet Henry Lawson in Grenfell in 1867 and changed their names to Peter and Louisa Lawson. By the birth of their third child, they moved to a selection at Pipeclay (now Eurunderee) 8 km north of Mudgee. Louisa Lawson's vigorous lobbying led to the establishment of the slab-
As the gold mines petered out in the latter half of the 19th century, Mudgee was sustained by the strength of its wool industry as well as the nascent wine industry established by a German immigrant, Adam Roth, in the 1850s. The arrival of the railway in 1884 further boosted the towns agricultural industries. The Wallaby Track Drive Tour visits various sites associated with Lawson including the old Eurundee Public School, the Henry Lawson memorial, the Budgee Budgee Inn, Sapling Gully, Golden Gully and the Albury Pub which was owned by Lawson's grandfather.