Before European settlement, the Aboriginal Bunurong people used French Island as a hunting ground, leaving behind shell middens and stone scatters. In 1802, a French scientific expedition named the island "Isle des Francais," which the English later called French Island. European settlement began around 1850, with settlers exporting salt, chicory, meat, milk, vegetables, and seaweed despite the island's harsh conditions. Many settlers returned to the mainland, but descendants of those early pioneers still reside here. The island housed a self-sustaining prison farm from 1916 to 1975, parts of which became a State Park in 1979 and later expanded into a National Park. In 2000, French Island became part of the Mornington Peninsula and Western Port Biosphere Reserve, promoting sustainable living practices.

Home to about 110 permanent residents and 100 part-time inhabitants, French Island fosters a self-sufficient community, adept at managing their own water and electricity. Residents embrace solar and wind technologies, with rainwater tanks providing household water. Farming and tourism are the main industries, complemented by a variety of artisanal and agricultural products, including organic livestock, olives, honey, and wine. The island features a general store, post office, primary school, community hall, cricket ground, and a Parks Victoria office. All roads are unsealed, and the island relies on satellite and wireless technologies for communication. As an unincorporated locality, community issues are managed by the French Island Community Association, ensuring a cohesive and collaborative approach to island life.