The City was named after the Indigenous Australian term Banyule or "Banyool", and was originally the name of a locality within the former City of Heidelberg before being adopted as the name of the new Council during the amalgamation of local government areas in Victoria.
Banyule is the birthplace of the Heidelberg School of Art, which was formed when a group of artists, including Tom Roberts, Arthur Streeton, Frederick McCubbin, Walter Withers, Charles Conder and others moved to a shack on Mount Eagle (now known as Eaglemont) and began painting the landscape in a uniquely Australian way during the late 1880s.
In 2002, prior to the state election, Transport Minister Peter Batchelor and local ALP state member Craig Langdon promised to Banyule Town Hall that the North East Link would not be built.