The area was settled in the 1871 following the discovery of gold, and the town surveyed and proclaimed in 1885. It was initially known as Mount Lookout, but was eventually renamed after the Scottish town of Aberfeldy. At its peak, the township has a population of around 500. After the gold rush, the town produced potatoes and other crops, and sheep and cattle were grazed.
Following the First World War the population diminished, though the town managed to survive. The hotel was burnt down in 1938 and the Black Friday bushfires of 1939 destroyed many of the town’s buildings. A road was constructed to Matlock by 1950, but it remains in poor condition to this day.
The town was home to Kitty Cane, a former dancer who was believed to have weighed 120 kilograms. At the time of her death, she had to be buried beside the road, because her body could not be lifted to the cemetery.
Today there are only a few permanent residents, though land was released for public sale in 1999. Remains of the former buildings are still visible.