In October 1859 a petition (PDF File) signed with the names of 144 interested locals proposed that 'Darling Point, Upper Paddington, and Watson's Bay' be formed into a municipal district under the provisions of the Municipalities Act of 1858.
 
The Municipality of Woollahra was proclaimed on 20 April 1860 and the first elections were held the following month.  The newly elected councillors met for the first time at the offices of Messrs. Rowley, Holdsworth and Garrick, solicitors, on 6 June.

Various changes have occurred to the boundaries of the area as originally proclaimed, including the secession of Vaucluse in 1895 - later re-amalgamated with Woollahra in 1948 - and the addition of the northern portion of the former Municipality of Paddington in 1968.

For almost 90 years the council operated from a headquarters within the suburb of Woollahra, moving to the current Redleaf chambers in Double Bay in 1947.