The town stands on Yarriambiack Creek, near Lake Corrong. 'Yarriambiack' is said to mean 'creek tribes' while 'corrong' is a bark canoe. Both words presumably derive from the language of the Yarrikaluk people who inhabited the area prior to European settlement.

Peter McGinnis was granted a sheep run here in 1846 which he named 'Lake Corrong'. In 1878 he sold his property to Edward Lascelles. Lascelles was dubbed the 'Mallee King' and 'Father of the Mallee' as it was he more than anyone else who was responsible for the European settlement of the district. He began the process of destroying local vermin such as the rabbits that had been introduced in the 1860s and which had significantly reduced wool production (a rabbit-proof fence was eventually built along the 36th parallel to prevent rabbits moving into the Wimmera region).

Lascelles also agitated for lengthier terms of tenure so that pastoralists could improve their land and he was the first to envisage an agricultural future for an area which was not considered to have much promise. He subdivided his property, developed a water supply and began growing wheat which has since become the mainstay of the region (half of the state's wheat and barley and a good portion of its oats now derive from the Mallee). To the west of Hopetoun he developed a six-acre experimental orchard named the Lochs and he successfully lobbied the government to extend the railway to Hopetoun in 1893.

Lascelles never made a fortune from his Mallee endeavours but never doubted his cause and, by the time he died at Geelong in 1917, he was regarded as one of the state's major pioneers. The fountain in the middle of town is dedicated to his memory.

Lascelles' homestead, built in 1891, became known as Hopetoun House after the seventh Earl of Hopetoun who was Victorian governor from 1889 to 1895 and the first governor-general of Australia (1901 to 1903). He was a friend of Lascelles' and a regular visitor to the house.

Hopetoun developed around and drew its name from Hopetoun House. The first township blocks were also sold in 1891. Water was channelled from the Grampians to the new settlement in 1899. After the First World War, many soldier settlers were granted farm plots