Norwood was founded in 1981 by concerned community members in response to high levels of social/financial hardship within their local communities. Norwood's founding mission was to offer housing support for vulnerable individuals and families. For many years Norwood implemented a housing based program targeting the homeless population who were marginalised by society because of their disability. Initially located in the inner west of melbourne, the service spread progressively across the west. Incorporated as the Norwood Association in 1985, staff were at the forefront of sector initiatives in the development of psychosocial rehabilitation as the core model informing practice.

In 1986 the service profile was expanded to encompass home-based outreach, group activities and community engagement pathways for people living with a mental illness who may also be experiencing financial disadvantage and/or housing distress.

In 1997 a further major shift in service model was prompted by changes in Government policy. Housing support was functionally split from service provision - with the latter expanded through the funding of an array of home based outreach programs and day programs. Norwood responded strategically by relocating its effort to the mid-west over 1997-99, and transferring its housing properties in other catchments to the appropriate PDRS services. During this time Norwood moved its base of operations to its current office in St Albans, from which it has continued to grow and diversify its services.

As one of the first community based services to provide specialist non-clinical support to people affected by mental illness, Norwood developed a wide ranging network of partnerships and collaborations with the government and non-government sectors. These relationships have been a critical success factor in enabling Norwood to achieve its strategic goals.