Indented Head was named by the explorer Matthew Flinders in 1802 when he observed the shape of the Bellarine Peninsula coastline from the summit of Arthurs Seat, across Port Phillip Bay. For many years the name Indented Head was applied to the whole of the Bellarine Peninsula. Flinders was at that time in the process of completing the first circumnavigation of Australia, undertaken between December 1801 and June 1803, making a detailed survey of the coastline for the British government, sailing aboard the H M S Investigator.
In 1835, the pioneer settler John Batman set up his base camp at Indented Head while he returned to Tasmania (then known as Van Diemen's Land) to collect his family and additional provisions. A monument marks the place (now in Batman Park) where he was believed to have landed. The escaped convict William Buckley made contact with the men at Batman's camp in July 1835. Buckley had been living with the local Wautharong aboriginals for over thirty years since his escape from an early settlement near Sorrento in 1803.
Camping grounds were established along the Indented Head foreshore during the 1920s but it was many years before a permanent population was established, the Post Office opening in 1947.
The area is still a popular family holiday destination and facilities include a sailing club, a boat ramp, jetty, and numerous sandy beaches. The shoreline also hosts a number of historical boat sheds.
The retired Port Phillip paddle steamer, Ozone, was sunk at Indented Head in 1925 to form a breakwater. The wreck remains a distinctive landmark visible offshore from the main beach. The Ozone's anchor has also been incorporated into a monument located on the cliff-top beside the Taylor Reserve camping ground.