Tom Wills is widely credited with devising Australian rules in Melbourne in 1858. A letter by Wills was published in Bell's Life in Victoria & Sporting Chronicle on 10 July 1858, calling for a "foot-ball club" with a "code of laws" to keep cricketers fit during winter. His letter attracted other football players, and an experimental match, played by Wills and others, at the Richmond Paddock (later known as Yarra Park next to the MCG) on 31 July, 1858, was probably the first game of Australian football. Unfortunately however, few details of the match have survived.

On 7 August 1858, two significant events in the development of the game occurred. The Melbourne Football Club, one of the world's first football clubs in any code, was informally founded, and a famous match between Melbourne Grammar School and Scotch College began, umpired by Wills. A second day of play took place on 21 August and a third, and final, day on 4 September. The two schools have competed annually ever since.

The Melbourne Football Club rules of 1859 are the oldest surviving set of laws for Australian football. They were drawn up at the Parade Hotel, East Melbourne, on 17 May, by Wills, W. J. Hammersley, J. B. Thompson and Thomas Smith (some sources include H. C. A. Harrison). The influence of English public school and university football codes, while undetermined, was clearly substantial. All members of the committee had experience of English or Irish games. Tom Wills, it is claimed, wanted to introduce Rugby School rules but the other three men felt Rugby School’s rough play and offside rules would not suit players older than schoolboys or the drier Australian conditions. They did look at the Rugby School Rules but also those of Eton, Winchester and Harrow.

Finally eleven simple Melbourne Football Club Rules were laid out, printed and, most significantly, widely publicised. As other Clubs began, including the Geelong Football Club, there were some rival rules which eventually gave way to an acceptance of the Melbourne Rules. The rules did not include the requirement to bounce the ball while running which was introduced in 1866.

It is also often said that Wills was partly inspired by the ball games of the local Aboriginal people in western Victoria. Marn Grook, a sport that used a ball made out of possum hide, featured jumping to catch the ball for the equivalent of a free kick. This appears to have resembled the high marking in Australian football. The original recorded size of the Aboriginal playing field varies with records, but most records state that the playing field was about 1.6 km (1 mile) long. There were no goal posts, but teams played until there was a single winner, sometimes the side with the player who had the most possessions or the side that kicked the ball the most and the furthest. Wills was raised in Victoria's western districts and is said to have played with local Aboriginal children on his father's property, Lexington, near Ararat.

While it is clear even to casual observers that Australian rules football is similar to Gaelic football, the exact relationship is unclear, as Gaelic football was not codified by the Gaelic Athletic Association (GAA) until 1887. Long before either code existed, traditional Irish football games, known collectively as caid, were being played. Historian B. W. O'Dwyer points out that Australian football has always been differentiated from rugby football by having no limitation on ball or player movement (that is, no offside rule). The need to bounce or toe-kick the ball while running, and tapping the ball with one hand rather than throwing it, are also elements of modern Gaelic football. O'Dwyer suggests that some of these elements may be attributed to the common influence of older Irish games.

Major clubs and competitions

In 1877, the game's first league, the Victorian Football Association (VFA) was formed. Gradually the game – known at first as "Melbourne Rules", "Victorian Rules" or sometimes as "Australasian Rules" – began to spread from Victoria into other Australian colonies in the 1860s, beginning with Tasmania (1864), Queensland (1866) and South Australia (1873). The game began to be played in New South Wales in 1877, in Western Australia in 1881 and the Australian Capital Territory in 1911. By 1916, the game was first played in the Northern Territory, establishing a permanent presence in all Australian states and mainland territories. In Newcastle, New South Wales the Black Diamond league was founded by Victorian gold miners and the Black Diamond Challenge Cup remains Australia's oldest sporting trophy.

The precursors of the South Australian National Football League (SANFL) and the West Australian Football League (WAFL) were strong, separate competitions by the 1890s. However, factors such as interstate rivalries and the denial of access to grounds in Sydney caused the code to struggle in New South Wales and Queensland. A rift in the VFA led to the formation of the Victorian Football League (VFL), which commenced play in 1897 as an eight-team breakaway of the stronger clubs in the VFA competition. By 1925, the VFL consisted of 12 teams, and had become the most prominent league in the game.

Players contest a mark at the 1933 Australian Football Carnival, at the Sydney Cricket Ground. The teams are Victoria and Tasmania. (Photographer: Sam Hood.)

The first intercolonial match had been played between Victoria and South Australia in 1879. For most of the 20th century, the absence of a national club competition — and the inability of players to compete internationally — meant that matches between state representative teams were regarded with great importance. Because VFL clubs increasingly recruited the best players in other states, Victoria dominated these games. State of origin rules were introduced in 1977, and saw Western Australia and South Australia begin to win many of their games against Victoria.

In 1982, in a move which heralded big changes within the sport, one of the original VFL clubs, South Melbourne, relocated to the rugby league stronghold of Sydney and became known as the Sydney Swans. In the late 1980s, strong interstate interest in the VFL led to a more national competition; two more non-Victorian clubs, the West Coast Eagles and the Brisbane Bears began playing in 1987. The league changed its name to the Australian Football League (AFL) following the 1989 season. In 1991, it gained its first South Australian team, Adelaide. During the next five years, two more non-Victorian teams, Fremantle and Port Adelaide, joined the league. The AFL, currently with 16 member clubs, is the sport's elite competition and the most powerful body in the world of Australian rules football.

Following the emergence of the Australian Football League, the SANFL, WAFL and other state leagues rapidly declined to a secondary status. Apart from these there are many semi-professional and amateur leagues around Australia, where they play a very important role in the community, and particularly so in rural areas. The VFA, still in existence a century after the original schism, merged with the former VFL reserves competition in 1998. The new entity adopted the VFL name and remained a primarily state based competition. State of origin games declined in importance, especially after an increasing number of withdrawals by AFL players, and Australian football State of Origin matches ceased in 1999. The second-tier state and territorial leagues still contest interstate matches.