Europeans settlers who arrived in the Tower Hill area during the 1840s initially took-up large pastoral runs. However as more settlers arrived the land was carved up into smaller holdings.

In 1850, blocks of Crown Land around the edge of the Tower Hill crater were sold. The banks and steep inner slopes of the crater rim were cleared and burnt to make way for improved pastures and agricultural crops.

The first permanent crossing to the Tower Hill islands (then surrounded by permanent water) was completed in 1867, one year after the remaining public lands - islands, the lake and the remaining two-fifths of the bank - were declared reserved for public purposes, to be managed by the Acclimatisation Society of Victoria.

Crops such as beets, potatoes and onions were grown on the islands. By 1870 there were 11 cottages on the islands, with rent paid to the Society's Committee of Management for Tower Hill.

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The Acclimatisation Society of Victoria had formed in 1861 when the concept of 'acclimatization' was popular. Acclimatisation sought to improve newly colonised lands by introducing exotic species or native species from other parts of the country for food, or nostalgia.
 
While the society believed in the preservation and fostering of wildlife and natural conditions, it also believed in improvement on nature. In line with its goals, the society allowed clearing for the planting of European grasses and introduced angora goats, jungle fowl and pheasants to Tower Hill and fostered the spread of rabbits which were taking a fast-hold on Victoria.

The society cleared blocks of land to lease for grazing as a means of raising money for fencing and supervision of the reserve, but it had little ability to control overgrazing, timber removal and burning. The Society was eventually revoked as manager of the reserve due to its failure to preserve the area from further destruction.

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Up until the 1850's, the forest around Tower Hill was reportedly so dense that people were concerned about getting lost. However, thirty years later, timber for building was being imported from Tasmania, as none remained in the local area.

Despite the creation of reserve at Tower Hill in 1866, all of the island's timber had been cleared three years later. The steep banks of the crater were also denuded and the loose soil slipped into the lake below with each rainfall event. The natural outlet of the crater-lake had been dammed and its waters became stagnant and salty in drier months.  

The speed and scale of the destruction of the natural environment at Tower Hill all done by hand was phenomenal, but unfortunately was not uncommon in this period of Australia's history.