The original spelling and etymology of the town's name is a matter of some debate. "Mussel Creek" (now called "Muscle Creek") was first named by a party of surveyors who found mussels in the small stream while camping along its banks in the early 19th century. The present spelling of Muswellbrook is said] to derive from the Muswell Hill area of London (England).
The first European to discover the area was Chief Constable John Howe in 1819. It was declared a township in 1833. Muswellbrook is situated in the northern parts of the Sydney basin, bordering the New England region.
The area is predominantly known for coal mining and horse breeding. Located to the south of the Muswellbrook Township are two coal fuelled power stations, Liddell and Bayswater. They were commissioned in 1973 and mid 1980s respectively and employ approximately 500 people from the area.