Cobden was founded in the 1840s by Dr. Daniel Curdie. He settled in the Heytesbury forest area on a small creek not far from where the present day Cobden lies. Dr. Curdie, so overcome by its beauty, christened the area Lovely Banks. The name was later changed to Cobden in honour of Richard Cobden. The Heytesbury Forest attracted logging companies and with them more settlers. Homes were built and stock set to graze on the newly established pasture. In April 1892 a railway was established from Cobden to Timboon and Port Campbell. The train carried out timber and came back loaded with produce and provisions. The prosperity was not to last however and as the Heytesbury forest was reduced in size, most of it surviving in the Jancourt State Forest, The need for freight trains waned. The last train was in 1977. The line has since been removed, its place taken by a walking trail. In 1888 Cobden opened the first cheese and butter factory in Victoria. Today the factory still operates, owned by Fonterra Co-operative Group Ltd, and houses the largest milk drying plant in Southern Hemisphere. Today Cobden and its surrounding area claim to be the “Dairy Capital” of the world, a claim based on the over 140,000 head of cattle in and around the area.
Part of the reason for the rich soil that surrounds Cobden is its convenient location against southern border of Lakes and Craters Country, the third largest volcanic plain in the world. Though the volcanos are dormant, the ash they once spewed has enriched the soil greatly.