Crucial palaeontological finds have been made at Lancefield Swamp, on the south-western edge of town (adjacent to Lancefield Sports Ground). In an area of 2000 square metres, the skeletons of about 10 000 animals were found in a 20-cm thick bone bed. There is a strong predominance of extinct megafauna including Macropus titan (a kangaroo twice the size of today's largest relative), Diprotodon (a rhinoceros-sized wombat) and Genyornis (a giant flightless bird), the toothmarks of Thylacoleo carnifex (the marsupial 'lion') and 26 000-year-old human artefacts which, together with carbon-dated bones, indicate that people lived with Australia's megafauna for a period of some 7000 years.

The concentration of carcasses could indicate either the congregation of animals around a water source in a drought period (with the consequent death through the consumption of all available food) or the usage of the waterhole as a hunting spot either for the marsupial 'lion' or human beings or both. Lancefield falls in the clan territory of the Wurundjeri Balluk.  Extensive quarry sites have been located just to the north-east of town at Mt William. Specified members of the Wurundjeri people (a sub-group of the Woiwurung) were responsible for quarrying the hard, dense greenstone of the mountain for the manufacture of stone axes. They were then traded for rugs, weapons and ornaments. This practice probably began long before European settlement and may have ceased in 1846. These axes have been found as far afield as South Australia and the Riverina area of NSW. European settlement began in the 1830’s.  The first township was established in the 1850’s at Deep Creek, north of Lancefield, but persistent flooding necessitated a move to higher ground.

The rich agricultural land supported farming and produced a fine variety of crops. Early industries included a malthouse, a brewery and a flourmill.
In1860 explorers Burke & Wills camped near Lancefield and the site is marked with a memorial stone close to Burke & Wills Track