The first European to traverse the area appears to have been Major Thomas MITCHELL who when he left the Glenelg River in August 1836, headed east and looked out from the top of a hill which he named Mt. Eckersley overlooking the site of the current township of Heywood.

In late 1839 Surveyor Charles James TYERS commented that the land about the Fitzroy River was fit for grazing and cultivation with a good supply of water available throughout the year. He also commented that its distance from Portland made it suitable for the location of a township.

The Fitzroy River crossing followed the usual pattern in that an Inn was established near the crossing, in this case by Samuel EVANS who obtained a licence in 1839 and established the "Bush Inn" or "Bush Tavern on the Second River", the Surry being known as the First River.

The first settlers in the area were the squatters and the first Pastoral Runs around Heywood and their occupiers were...

• "Fitzroy Lestrange" - Charles SAUNDERS, Sep 1841
• "Fitzroy River" (or "The Cave Holes") - David Edgar, Jan 1842
• "Mt Eckersley No 1" (or "Bell's Farm") - John BELL, 1843
• "Ettrick" - William LEARMONTH, Aug 1844
• "Mt Eckersley No 2" (or "Hunter's Farm") - Colin HUNTER, 1845
• "Oakbank" - Donald CAMERON, 1845
• "Drumborg" - Francis SCOTT, 1846

James Bonwick recorded in 1857...

Heywood is the township upon the Fitzroy. An hotel was established here by Mr. EVANS as early as 1839, but for many years it has been conducted by Mr. BILSTON, who succeeded Mr. Edgar. I found comfortable quarters there. The township was formed some four years since, at the time of Township Mania. It is situated on the usual uninteresting flat of the region round, and ingenious Dutch contrivances are adopted to prevent an entire swamping. Two hotels, a fair store, and a few huts form the city of Heywood. It is not a very enlightening neighbourhood. No school existed there, and no religious services have been held in the township.

On Black Thursday, in 1851, the fire reached this inland resting place, and a few moments were sufficient to consume everything. Some articles of clothing were rescued and thrown into the waterhole of the creek; but even there the raging flames reached them, and burnt all that appeared above the edge of the water. A dray was consumed in the road. The poor, terrified children were placed for safety beneath the bridge. But even from this refuge they were driven, by the fire reaching and burning it. The neighbouring forests were filled with smoke and flames, the shifting wind occasionally showing huge columns of the roaring element, or bringing down a perfect tempest of fire.

Mount Eckersley is three miles north of Heywood. The base is of more compact basalt than the top. A half circle of hills seems to bound an ancient crater, in the centre of which a cone arises. The red earth in the immediate neighbourhood is very rich; beyond it is covered by the sterile clay and gravel. About three miles to the south-west of Heywood the limestone crops out, and gives a beautiful patch of land to the farmer. There are caves with alabaster stalactites, and some really very choice and valuable marbles.