Prior to 1885, there was no Anglican church in North Carlton and Princes Hill to serve the pastoral needs of the growing population. The nearest churches were St Jude's in Lygon Street, Carlton, and St Luke's in St George's Road, North Fitzroy. In 1885, Bishop Moorhouse sanctioned the separation of North Carlton to form a separate parish and St Michael's was born. A suitable site was found on the corner of Tucker (now McIlwraith) and Macpherson Streets and the land was procured by James Moorhouse, William Edward Hearn and Thomas Turner a'Beckett on behalf of the Anglican Church. The foundation stone for the church was laid by Sir George Verdon on 18 February 1885 and the opening service was held on Sunday 24 May in the same year. The brick church was designed by architect James Gall (Gaul) and built by Robertson & Stewart. The new parish and the building of the church had the full support of the community. The architect drew up the plans free of charge and the project was funded by donations and interest-free loans. Parishioners provided material support with donations of carpeting, chairs and other furniture, a church bell, collecting plates and communion cloths.
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