Claim: UNESCO labeled Melbourne as a City of Literature.

Melbourne -LRB- -LSB- ˈmɛlbərn -RSB- -RRB- is the capital and most populous city of the Australian state of Victoria , and the second-most populous city in Australia and Oceania . The name `` Melbourne '' refers to an urban agglomeration spanning 9900 km2 , which comprises the broader metropolitan area , as well as being the common name for its city centre . The metropolis is located on the large natural bay of Port Phillip and expands into the hinterlands towards the Dandenong and Macedon mountain ranges , Mornington Peninsula and Yarra Valley . Melbourne consists of 31 municipalities . It has a population of 4,641,636 , and its inhabitants are called Melburnians .   Founded by free settlers from the British Crown colony of Van Diemen 's Land on 30 August 1835 , in what was then the colony of New South Wales , it was incorporated as a Crown settlement in 1837 . It was named `` Melbourne '' by the Governor of New South Wales , Sir Richard Bourke , in honour of the British Prime Minister of the day , William Lamb , 2nd Viscount Melbourne . It was officially declared a city by Queen Victoria , to whom Lord Melbourne was close , in 1847 , after which it became the capital of the newly founded colony of Victoria in 1851 . During the Victorian gold rush of the 1850s , it was transformed into one of the world 's largest and wealthiest cities . After the federation of Australia in 1901 , it served as the nation 's interim seat of government until 1927 .   Melbourne rates highly in education , entertainment , health care , research and development , tourism and sport , making it the world 's most liveable city -- for the sixth year in a row in 2016 , according to the Economist Intelligence Unit . It is a leading financial centre in the Asia-Pacific region , and ranks among the top 30 cities in the world in the Global Financial Centres Index . Referred to as Australia 's `` cultural capital '' , it is the birthplace of Australian impressionism , Australian rules football , the Australian film and television industries , and Australian contemporary dance . It is recognised as a UNESCO City of Literature and a major centre for street art , music and theatre . It is home to many of Australia 's largest and oldest cultural institutions such as the Melbourne Cricket Ground , the National Gallery of Victoria , the State Library of Victoria and the UNESCO World Heritage-listed Royal Exhibition Building . It was the host city of the 1956 Summer Olympics and the 2006 Commonwealth Games .   The main passenger airport serving the metropolis and the state is Melbourne Airport -LRB- also called Tullamarine Airport -RRB- , the second busiest in Australia . The Port of Melbourne is Australia 's busiest seaport for containerised and general cargo . Melbourne has an extensive transport network . The main metropolitan train terminus is Flinders Street Station , and the main regional train and coach terminus is Southern Cross Station . Melbourne is also home to Australia 's most extensive freeway network and has the world 's largest urban tram network .