The name 'Molong' is derived from an Aboriginal word of the Wiradjuri tribe meaning 'place of many rocks'. The original settlement was located about 1.5km east and little is known of this earlier site which accommodated the embryonic township for more than 20 years. It began as a Government stockade in 1822 which served as a stopping point for stock travelling to the convict station established at Wellington in 1823.

The first land grant in the area was to William Lee who was granted title in 1832 while other holdings were taken up by Marsden, Kite, Betts and Robarts around that time. This was also around the time that Major Thomas Mitchell was exploring areas of inland Australia accompanied by Aboriginal tracker called Yuranigh. Mitchell's journal records 91 references to his many qualities. Yuranigh was killed in 1850 on the southern outskirts of the present town and was buried about 2km further south 'according to the rites of his tribe'. The grave, not far from the highway, is 'guarded' by four marked trees. A headstone and railing were erected in 1852 by the NSW Government with Mitchell paying the cost.

Copper was discovered at Copper Hill, 3km north of the town, in 1845 and the site may have developed into a town had the discovery of gold at Ophir in 1851 not drawn all the miners away. The site for a permanent village of Molong at the present location was gazetted in1849 and the first land sales took place in 1856.

The municipality of Molong was constituted in' 1878. Although the railway did not arrive until 1886 the decision was made in 1881 and this alone was sufficient to boost the town's development with banks being established and shops built. Molong was the terminus of the railway for seven years and the amount of business generated was considerable. The 1870s and 80s were a period of prosperity throughout Australia and Molong was no exception with many buildings erected.