DGS was originally named the Diocesan Native Female Training School in 1860, when it was founded at Bonham Road and Eastern Street in Hong Kong Island. The school set up by Lady Lydia Smith, the wife of George Smith (Bishop of Victoria) (), who was the First Bishop of Victoria sent by the Society for Promotion of Female Education in the East, a sub-society of the London Missionary Society. At first, it admitted only girls. In 1866, it was renamed Diocesan Female School. Because of financial problems, the school had to restrict its services solely to orphans and destitute girls. In 1869, it became the Diocesan Home and Orphanage and accepted boys as well.