Muswellbrook was declared a township in 1833. It was discovered by Chief Constable John Howe in 1819 and in 1824 major parcels of land were surveyed by Henry Dangar along the banks of the Hunter River for allocation to early settlers.
The rich soils surveyed by Dangar resulted in Muswellbrook being established as a farming centre. The first railway was completed in 1869 and the town experienced significant expansion within this period. Of major importantance was the first coal mine in the area in the 1890's. The boundaries of the shire were officially defined in 1907 when Muswellbrook Shire was created from within Wybong Shire area.
Prior to European settlement, the Muswellbrook Shire was occupied by people of the Wonnarua/ Wanaruah language group. The Wonnarua/ Wanaruah people traded and had ceremonial links to their neighbouring tribes such as Awabakal, Darkinung, Geawegal, Kamilaroi, Wiradjuri and Worimi. The Muswellbrook Shire Local Government area is located within the Wanaruah Local Aboriginal Land Council boundary. Aboriginal people living in Muswellbrook Shire now comprise 5.2% of the total population according to the most recent ABS census data.
There were 41 houses as well as some inns and shops. A flour mill was built around 1841, reflecting the fact that wheat, along with wool, was the centrepiece of the local economy.
In 1842 the sons of Francis Forbes established the private village of Forbestown south of Muscle Creek but due to confusion with the town of Forbes it was changed to South Muswellbrook in 1848.
When the railway arrived in 1869 it boosted the local economy as the settlement became the northern railhead and the population climbed to about 1500. However, when this advantage passed on to Scone the town shrunk again. When Muswellbrook was declared a municipality in 1870 the population was 1445. Coalmining began in the 1890s although truly large-scale coal mining didn't get under way until more recently. There are now eight mines operating in the area (seven of them open-cut) with another six proposed.
After the First World War the larger properties were broken up into smaller farms with dairying supplanting wool and wheat. Many of the larger rural properties were broken into smaller farms and replaced dairying and wool and wheat as the main rural industry. This trend continued till late 1979.
In 1979 the Shire of Denman and the Municipality of Muswellbrook amalgamated to form present day Muswellbrook Shire. Writer Donald Horne, author of The Lucky Country, was raised in Muswellbrook and wrote of his experiences in The Education of Young Donald (1967).
The town's Agricultural Show is held in April and the Spring Wine Festival in October. The Muswellbrook Cup is held on Melbourne Cup Day.