The Lilydale & District Historical Society was formed in 1971 to help plan and mount suitable displays for the Shire of Lillydale's Centenary in February 1972.
After the celebrations, society members tried to return objects loaned for display but their owners said the society could keep them.
This was the start of the society's collection but it lacked a suitable storage and display space. With the assistance of the Shire of Lillydale, in 1976 the society was able to open its own museum in the former shire offices in Castella Street, Lilydale.
The Museum was opened by Pamela, Lady Vestey, Dame Nellie Melba's grand-daughter who was the society's Patron until her death in 2011.
The society operated the museum until 1989 when, due to the value of the collection and the need to plan a major re-development, the Shire of Lillydale took over the management of the museum and employed Victoria's first full-time municipal curator.
Today, the Yarra Ranges Regional Museum is owned by the Shire of Yarra Ranges.