The first permanent settlement in the area was the "Tallygaroopna" sheep station, established in the early 1840s. By 1843 the station was being run by a man named Sherbourne Sheppard, the town's eventual namesake. With the advent of the Victorian gold rush in the 1850s, the area became a popular river crossing point for miners travelling east from the Bendigo and Ballarat goldfields. As there was yet no bridge across the Goulburn River, Irish entrepreneur Patrick Macguire soon set up a punt service to ferry travellers across the river, erecting the town's first building in the process, the punt house. Macguire sold the building to John Hill in 1853, who converted it into a hotel, the Emu Bush Inn. This settlement soon became known as Macguire's Punt, a name it would keep into the 1870s. A post office opened in February 1854, but closed in July that same year.