The Djargurd Wurrung people were the traditional Aboriginal people of the Camperdown area, who had lived in the area for countless generations as a semi-nomadic hunter gatherer society.
The area's history records instances of mutual assistance and friendship between native and settler people. Notable on this account is the family of David Fenton, the Scottish Presbyterian shepherd and drover who built the first house in Camperdown in 1853.
In 1883 Wombeetch Puuyuun (also known as Camperdown George) died at the age of 43 and was buried in a bog outside the bounds of Camperdown Cemetery. His friend, James Dawson was shocked at this burial upon his return from a trip to Scotland, and personally reburied Wombeetch in Camperdown Cemetery.
He appealed for money to raise a monument, but finding little public support, he primarily funded the monument himself. The 7 metre obelisk was erected as a memorial to Wombeetch Puuyuun and the Aborigines of the district, and has been described as being still inspiring today.
The town was surveyed in 1851 and named Camperdown after the Scottish naval hero Lord Viscount Adam Duncan the Earl of Camperdown. The first dwelling was erected on the site of the present Commercial Hotel in 1853  and the Post Office opened on 1 January 1854 replacing an earlier one in the area named Timboon.
It became the service centre for the vast pastoral empires of the region. The Port Fairy railway line was opened in 1883, and branch lines later extended from it to other parts of the south-west of the state.
By the mid 20th century Camperdown had emerged as a more diverse centre for dairy farming which drew on its rich volcanic soil, for woolgrowing and for produce processing industries. By the late 20th century the town had become a major centre for tourism because of its unspoiled 19th century architecture and as a gateway to the southern tourist attractions of the Otway Ranges, the Great Ocean Road and the 'Shipwreck Coast'. In more recent years, however, the drought in Australia in the 21st has affected Camperdown's dairy industry.
Camperdown lies within the 'Lakes and Craters' region, sitting at the foot of Mount Leura which together with nearby Mount Sugarloaf are part of a large extinct volcanic complex known as the "Leura Maar". To the immediate west are the deep volcanic crater lakes Bullen-Merri and Gnotuk while to the east is the crater lake Purrumbete popular for its Trout and Chinook Salmon fishing.
The town is renowned for its classic historical buildings. Central is the 103-foot (31 m) high Gothic Manifold Clock Tower, built 1897, which sits in a wide Elm lined median between the dual carriageways of Manifold Street, named in honour of one of the pioneer pastoralists. Tower, avenue, Boer War memorial, Soldiers' memorial, memorial cross and JC Manifold statue are all listed on the Victorian Heritage Register.
Among the many other classic buildings are the 1886-7 two storey Georgian style Court House, the 1863 two storey bluestone (granite) Camperdown Post Office, Theatre Royal (1890) and Masonic Hall (1867–68).
The town has a life-sized statue of the Scottish poet Robert Burns, carved from sandstone in the 1830s and based on the earliest painting of the Bard. Efforts to restore the statue led to a festival celebrating the town's connection with Burns being held in 2012 and then annually.