The broader area around the town, including Hepburn Springs to the north, is renowned for its natural spring mineral spas where visitors can sample the mineral water. This together with its proximity to Melbourne make it a popular destination for tourists.
Market gardening was developed by Chinese immigrants who worked on the goldfields shortly after the town was founded, and a local flour mill was opened in the 1860s but closed down because the climate is too wet for effective grain production. Vegetable growing is still a significant industry, as the region has a good climate for the production of such vegetables as potatoes and is near enough to the large Melbourne market to provide a low-cost supply.
Due to it being located in mountains, formed by volcanic activity about five million years ago, the region contains as much as 80% of all the mineral springs in Victoria. Not long after settlement Daylesford had been noted for these mineral springs and from the 1880s to the 1920s the town was a major spa resort after the railway from Carlsruhe reached the town in 1880. Four separate areas Wombat Flat, Daylesford, Old Racecourse and Spring Creek gradually were amalgamated into the town of Daylesford-Hepburn Springs, although even now Hepburn Springs still retains its separate and strongly held identity and is strongly identified with the Swiss Italian families.
Daylesford is a unique gold town in that it did not wither away like so many others when the easy payable gold ran out. Many sawmills had been established to supply the mines and these created employment for the out of work miners. The Land Acts of the 1860s enabled cheap land to be taken up and many miners became farmers on small areas.
The gold seekers were at times typified as “a mere collection of fortune hunters” and “nothing but unscrupulous gamblers”. Yet many of them stayed and contributed to the building of a new society, albeit a very English one.
The boom times of the 1860s when many of the notable structures in the town were built, the Post Office, the hotels, the Courthouse and Lockup, the Gold Commissioner's residence and Police Barracks, and the churches, gave way to a slump which lasted until the advent of railways in the 1880s. Mineral water was, from the 1860s, of great interest to the Swiss Italian and English inhabitants and this led to the establishment of a bottling plant and a bathhouse.
Through the endeavours of Donald McLeod, a self educated man, who rose from being a miner to Town Clerk and in 1903 Minister for Mines in the Victorian Government, the Cornish Hill mines were deepened in the early 1900s and another boom period took place, which saw further development of the town. The Royal Hotel, the Commercial Hotel, the Belvedere, and other buildings in Vincent Street attest to this boom period, which was brought to a halt by the First World War.
The railways which had brought many tourists to what was regarded as a beauty spot and health resort was superseded by the car in the 1950s and Daylesford once again entered a period of decline only truncated by a new interest in health and alternative lifestyle in the 1970s and 1980s.
Many groups from differing countries contributed to the early rise of Daylesford and Hepburn. The Irish at Eganstown were prominent in many fields, and also the French vintners at Glenlyon, the Germans at Rocky Lead the Italians at Old Racecourse, and the English, Scots, Welsh and Cornish in Daylesford itself. The now non-existent town of Dry Diggings was home to one of the largest groups of Welsh in Victoria and the congregation was large enough for them to have their own chapel, and for those who lived on the south side of Wombat Hill, a postal address of St Just would be enough to have mail delivered. St Just was a large town in Cornwall.
The Court House was a home away from home for the Irish as many of the early magistrates and lawyers were from the Emerald Isle. Joseph Henry Dunne, a lawyer, was one of the defence team at the Eureka riots trials, and magistrate James Daly, an Anglo-Irishman, was a gold warden in Ballarat at the time of the Eureka stockade.
Every St. Patricks Day and St Andrew's Day, the court would be closed to enable them to celebrate. One of the most prominent early councillors, George Jamison, was an American, as was the first Captain of the Fire Brigade, William Henshaw. Another prominent councillor was the Hungarian William Prohasky.
Although the Italians and Swiss in Spring Creek and Old Racecourse had an influence over their power base in the Yandoit-Franklin Road Board, the rise of Daylesford was driven entirely by men of English, Anglo-Irish, Cornish, Scottish and other origins.
Lake Daylesford, originally an idea by a Norwegian, Christian Christensen, to provide hydro-electric power to the town, was finally brought to fruition in 1929 by Councillor Trembath, a descendent of a Cornish miner. The Gas Company, which was formed in 1862, was the work of Henry Courtis, a man who had supplied gas to Castlemaine, Ballarat and other towns; nothing now remains of the gas works except the tiny cottage of the manager off Raglan Street towards the hospital. The hospital itself was an initiative by a group of two Englishmen, one Spaniard, a Dane, two Anglo-Irish, and a German Jew who first sat in committee in 1861. These men worked together amicably for a common cause until the hospital was opened in May 1862.
The spa resorts declined in the 1930s, but were redeveloped in the 1970s. Since then, Daylesford and all of the eastern Shire of Hepburn has become a major alternative lifestyle centre, with such services as massages, reiki, shiatsu, acupuncture, aromatherapy, reflexology, spiritual healing, and tarot being found.
The town is noted for its food and wine industry with award winning restaurants. Daylesford is also known for being a gay-friendly destination.
The gardens, jewellery and art works at the Convent Gallery is another tourist attraction
Nationally significant as one of Australia's finest pinetums, the Wombat Hill Botanic Gardens dominates the skyline above Daylesford. Its lawns surrounded by forest/park are perfect for a picnic or a fresh circuit walk.
Daylesford's New Year's Eve Gala is one of the few remaining town street parades. The following day sees a real country sports day at the Glenlyon Reserve. January features the Boite Singers Festival, the Organs of the Ballarat Goldfields Festival of Fine Music, and the Lavandula Lavender Harvest Festival.
The ChillOut festival is held during the Labour Day long weekend in March each year and is the largest gay and lesbian festival in rural and regional Australia. ChillOut is typically attended by more than 20,000 people and the 11th annual festival was held on 7-10 March 2008. Other festivals include the Daylesford Highland Gathering and the Swiss Italian Festa.
There is also a tourist railway (the Daylesford Spa Country Railway), which has one of the largest collections of railmotors in Australia.
The nearby Wombat State Forest has many walking tracks, and is also host to the Rocklyn Yoga Ashram in the Satyananda Yoga tradition.
Daylesford is also home to the Daylesford and Hepburn United Soccer Club, also known as the Saints or the Sainters. The Saints have won four league titles in their short 20 year history and have also won two cup finals.
At 616 metres above sea level, it has a cooler, wetter climate than Melbourne. Summer (January-February) temperatures range from 10 °C (50 °F) to 37 °C (100 °F), while July temperatures are cold, ranging from about 1-2 °C (34-36 °F) to 9 °C (48 °F). Annual precipitation, occasionally falling as snow, averages about 870 millimetres (34 inches) but has ranged from 445 millimetres (18 inches) to over 1350 millimetres (53 inches). The Wombat Gardens are a favourite place for snowmen to be made.