AustLit began in 1999 when a group of Australian universities, which had developed specialist Australian literature databases over the previous decade, decided to pool this knowledge into a single web based information service.

The two major projects forming this collaborative enterprise were the AUSTLIT: Australian Literary Database from UNSW at ADFA and the Australia's Literary Heritage Project, a collaboration between researchers at five universities with the central project being The Bibliography of Australian Literature.

AustLit won substantial grant funding from the Australian Research Council in 2000 and 2001, which funded development of AustLit's information architecture and the migration of diverse sets of biographical and bibliographical data into a single database. The Australian Research Council awarded further funding to AustLit for 2003: this was used to develop further biographical and bibliographical content, and a substantial body of retrospective full text material.

Further ARC funding in 2006, 2007 and 2008 has enabled the AustLit team to work towards the completion of The Bibliography of Australian Literature and the creation and enhancement of tens of thousands of biographical records and approximately 100,000 work records with complete publishing history, including translations, reprints and adaptations. This work has occurred alongside the current indexing to ensure AustLit remains an up-to-date resource for the study and teaching of Australian literature, and the development and support of specialist research projects.