The Australian Shepherd was a particularly tireless sheep herder in the Rocky Mountains because it is relatively unaffected by altitude. Ranchers in Boulder, Colorado, began breeding the dogs which would attract purchasers from as far west as California for their legendary sheep-herding abilities. A theory suggests that they were named for the imported sheep that they herded. It is also possible that many of the dogs coming from Australia were blue merle and the adjective "Australian" became associated with any dogs of that coat color.
Breeds as we know them today did not exist before Victorian times, but local variations of the ancestors of current breeds came into America along with their owners and livestock. Included are some that are now extinct or that have merged into other breeds. These may have included some British herding dogs, native dogs from North America (originating in Asia/Siberia), as well as dogs from Germany and Spain including the Carea Leonés. For many centuries, shepherds were more interested in dogs' working abilities than their appearance. As a result, over time, shepherds interbred dogs that they believed would produce better workers for the given climate and landscape. In the eastern U.S., terrain and weather conditions were similar to that of Europe, so the existing imported breeds and their offspring worked well there.
Development of the breed began in the American West. The breed's foundation bloodlines are depicted in the Australian Shepherd Genealogy Chart showing the relationship between the early families of dogs. The American Kennel Club (AKC) ranked the Australian Shepherd as the 17th-most popular breed in the United States in 2016.
Selective breeding for many generations focused on aspects of the dog that enabled it to function as an effective stockdog in the American West. It had to handle severe weather; have plenty of speed, athleticism, energy, and endurance; and be intelligent, flexible, and independent; while remaining obedient. The actual foundation for the Australian Shepherd was established between the 1940s and the early 1970s, when the Australian Shepherd Club of America was formed and the registry was started.
Their stunts and skills earned them places in several Disney films, including Run Appaloosa Run and Stub: The Greatest Cowdog in the West. An Australian shepherd was featured in the film Flight of the Navigator (1986) and the TV series Flash Forward (1996). More recently, an Australian Shepherd starred in the film Famous Five (2012) and its sequels.