The Diocese was founded in 1874 from the Diocese of Melbourne, consisting of the land bordered by the Murray River to the north and east, the Loddon River to the west and the Great Divide to the south (37th degree latitude). At the time five missions: Sandhurst, Beechworth, Wangaratta, Heathcote and Echuca already existed with numerous Mass stations including several parish and private church schools.

The early missions were established in response to the rapid movement of people to the gold rush centres in Victoria and later to the opening of rich pastoral areas north of the Great Divide. The Diocese was formed two years after the 1872 Victorian Education Act at which time the Australian Catholic Bishops decided to establish Catholic schools in every parish of Australia. Religious orders were recruited from Ireland and France to augment and train the existing lay staffs of the schools. The Diocese of Sandhurst grew to its present size of 40 parishes, 43 primary schools, 12 secondary schools and 3 specialist schools.

In response to the needs of society and the Catholic People, many educational, health care and human services have been established over time. At one time Sandhurst had more boarding schools than Melbourne, but some of these services became obsolete as new ways to serve educational needs emerged: CatholicCare (counselling services), the Diocesan Development Fund, Catholic Education Sandhurst, School Boards, Pastoral Councils, and Faith Education Sandhurst are some of the service organisations that exist within the Diocese.