Dating back to 1840 the land was first utilised by settlers for grazing and the first road cut through the area now known as Croydon, was initially known as Sawmill Road, as a sawmill was nearby. Later it became known as Oxford Road and later Mt Dandenong Road, some time in the early 1900s.

Owing to the coarse silvery-white grass, the area now known as Croydon was first called "White Flats". The Lacey family from Essex, England named the area Croydon after Mrs Lacey's home town. They preferred this to Mr Lacey's home town, Steeple Bumpstead. The Lacey family has a street named after them near the Main St. shopping precinct.

In 1868 parcels of land were surveyed and the first habitations were constructed with wattle and daub. These were later rebuilt in timber and the area prospered in sheep, beef and dairy farming, and sawmills. Orchards were soon established and thrived. Crops included apples, cherries, pears, peaches and plums. Street names in and around Croydon now reflect the impact orchards had on "White Flats".

In 1874 Cobb & Co. ran horses and carts to the area, also known as Brushy Creek.

In 1882 a single rail track was constructed through to Lilydale. When opened on 1 December 1882 the station was called Warrandyte. Travellers would travel by rail to "Warrandyte" station and were then faced with a horse and coach ride to Warrandyte, some 10 km north, which was not well received by the vast majority of travellers, believing the Yarra River was close by. On 1 August 1884 it was renamed Croydon railway station.

From the mid-1880s Croydon started to develop and Mr James Hewish built his home and several other business ventures, including a general store, news agency, butchers shop and hotel, and planted various orchard trees. The Post Office opened on 1 December 1883 after the railway line was established. Nelson's Hill Post Office opened nearby in 1902 and was renamed Burnt Bridge in 1979.

In 1908 Croydon Hall, in Mt Dandenong Road, was built. It is now home to EV's Entertainment Centre.

In 1912 Croydon was proclaimed and gazetted as a town.

In 1925 the Croydon section of the Lilydale railway line was electrified, with electrification arriving at Lilydale a month later. Croydon railway station was rebuilt in the 1980s. As part of its increasing passenger traffic the bus station/interchange was revamped in the early 2000s and is used by Invicta and Ventura Bus Services.

In the early 1920s a Monday market began. The market included live animals, chickens, birds and other small animals. It was a noted landmark and meeting place for locals from neighbouring suburbs until the site was redeveloped in the 1980s. It closed down in 2012.

Originally Croydon was part of the Shire of Lillydale. In 1957 a request was submitted for Croydon to leave the Shire of Lillydale and become its own entity. The City of Croydon|Shire of Croydon was incorporated in May 1961 and was proclaimed a City in 1971. It was merged, along with the City of Ringwood, into the City of Maroondah in 1994.

Croydon today

Main Street, Croydon, is still the thriving hub and currently has over 187 traders, from eateries, clothing, music, toys, hairdressers, a cinema and many others. The Main Street has ample parking on and behind the shops.

The Croydon Market Complex, as it is now known, has been subject to several development applications, including one for a small cinema complex to be built, which did not eventuate. The key tenant being a 19 aisle Coles Supermarket (second largest in Victoria) and 15 or so smaller traders, including a newsagent, chemist and various clothing, eateries, florist and bakeries. In the early 2000s the site was expanded to include an Aldi supermarket, taking over part of the existing carpark on the Kent Avenue side of the block.

Croydon is also served by the Arndale Centre and Civic Square, located on Mt Dandenong Road, opposite the Croydon Park, which has in excess of 20 retail outlets of size and type.

During the late 1990s and early 2000 onwards, Croydon's housing density and type changed and increased with the advent of 'dual-occupancy'. Many of former large housing blocks were sold and redeveloped.

Residents have since then seemed to feel slightly aggrieved with some actions in the City and have more than once stated at Council meetings and in the local newspapers over the years that they are 'second cousins to those in Ringwood'.

The Croydon area is served by two weekly newspapers; the Maroondah Journal and the Maroondah Leader. These are distributed weekly.