Daylesford is 111km north-west of Melbourne and is located on a ridge which is over 600 meters above sea level. It is 45km north-east of Ballarat. During the Gold Rush of the late 19th Century, the town flourished and expanded with the arrival of a number of Swiss and Italian settlers, their influence on the gardens and architecture has been profound, bestowing upon the town a European feel.

Daylesford is located atop rock strata and volcanic basins. Water trapped in these basins has slowly leached minerals from the 450 million year old rocks; minerals which are believed to have a curative effect. Subsequently Daylesford is known as the "Spa Centre of Australia". Daylesford was first settled by the English Captain John Hepburn in 1838. A settler from Ireland, John Egan established the town location and called it "Wombat Flat". It was later renamed by Sir Charles Hotham after the English birthplace of the Sir Warren Hastings, the first Governor General of India.

Egan and others discovered alluvial gold only several hundred meters from the location of Chata today, thereby starting the local gold rush. By 1859 over 3400 diggers were seeking their fortune in the area, 800 of whom were Chinese. Mining continued until the 1930's by which time Daylesford had become a fashionable spa resort, helped by the arrival of the railway in 1881.

Today there are innumerable businesses including over 400 Bed & Breakfasts, offering a number of "alternative" services including every kind of massage known to man as well as Reiki, shiatsu, acupuncture, aromatherapy, reflexology, spiritual healing, tarot and palm readings etc.