In 1835 Charles Ebden took up the Bonegilla pastoral run. The name is thought to be derived from an Aboriginal word meaning deep water hole or big cattle camp. (The locality of Ebden is south-east of Bonegilla.)

A primary school was opened in Bonegilla in 1876 and by 1910 it also had two hotels and a railway connection (1890) to Wodonga.

During the second world war a military camp was established at Bonegilla for the training of infantry and bomb-disposal personnel. Some Italian prisoners-of-war were also held there, and after the war some Australian and American prisoners-of-war from Japanese prisons were brought there. In 1947 the military camp was acquired for a reception centre for migrants, mostly from Europe. This following a decision by Arthur Caldwell, Minister for Immigration, to reuse military camps to house the huge wave of migrants coming from war-torn Europe, know as displaced persons.

Until its closure in 1971 the reception centre was temporary home for over 320,000 migrants from over 50 countries. Up to 5,000 lived there on some occasions. Some had short stays, but others remained there for a year or more, often because of non-recognition of their overseas qualifications. Disturbances in 1961, mainly caused by unemployed migrants who expected better food, climate and job prospects fifteen years after the war, resulted in police action which fizzled out and migrants were transferred to hostels in metropolitan Melbourne. During that time a primary school (1952-71) struggled with erratic school populations and over forty nationalities. The migrant reception centre closed in 1971. Some migrants settled in Albury-Wodonga.

On 5 December, 1987, a Back-to-Bonegilla day was held to celebrate the fortieth anniversary of the opening of the migrant reception centre. A second Back-to-Bonegilla was held in 1997.