Keilor is a township in a basin of the Maribyrnong River. James Watson from Scotland was the first land-holder in the district and also gave the suburb its name. Keilor in the early times of the gold diggings was a noted camping place for bullock teams to and from the diggings at Castlemaine and Ballarat. Spanning the river was a wooden bridge which was replaced by an iron bridge in 1868.

About 1 million years ago lava covered the previous landscape and created basalt plains. Over time, the Maribyrnong River carved itself through the basalt plains. Australian megafauna including 3-metre high kangaroos and Diprotodons were found in the area until extinction about 13,000 years ago at the end of the ice age.

The Wurundjeri Indigenous Australians inhabited the area for approximately 40,000 years. It is one of the oldest inhabited sites in Australia.

In about 1838-39 the first European settlements were established by pastoralists James Watson and Alexander and John Hunter. James Watson is thought to have named their home station after a farm called Keillor in Forfarshire, Scotland, one of four which his father, Hugh Watson, tenanted.

One of the earliest settlers in Keilor was William Taylor (1818–1903) who in 1849 bought 13,000 acres in the district and built a house which he called Overnewton. He transformed this building in 1859 into a Scottish Baronial mansion known today as Overnewton Castle.

In the 1850s people would stopover at Keilor during their travels from Melbourne to the Bendigo goldfields. Keilor saw an influx of new settlers who intended to cash in on this new market. Keilor Post Office opened on 2 March 1854 and a general store, blacksmith, hotel, police station, courthouse and bridge were all built during this time. The area became an agricultural district and remained so until after World War II when the suburb saw a rapid increase in population due to cheap land and the establishment of large industries in surrounding suburbs.