Seaspray is located on the Ninety Mile Beach, Gippsland at the mouth of Merriman Creek, about 32 km south of Sale and 245 km east of Melbourne.

The flat coastal plain was taken up by P.C. Buckley as the Coadyvale pastoral run in 1848. The homestead, named Prospect, overlooked the present town site. By the 1860s Sale residents were visiting the area, camping on the foreshore at the creek mouth and fishing on the beach and in the creek. The locality became known as Buckley’s Beach.

In the late 1870s the area was under threat of selection. Through public interest, a reserve of 51 acres was set aside, to be known as Ninety Mile Beach Reserve. This was soon increased to 225 acres and was commonly known as Prospect Reserve. Trustees were appointed and funds raised to fence the whole reserve. During the summer camps were set up on the foreshore or huts built in the scrub, with swimming, fishing and shooting the main pastimes. In the late 1890s dunes were built and planted with marram grass to halt drifting sand. Holiday makers travelled from Sale by buggy and bullock wagon, the road gradually being improved by working bees organised by James McLachlan, Member of Parliament for Sale. He was keen to foster the growth of the reserve and organised several cycle races from Sale to publicise the resort.

From 1900 some permanent buildings were constructed at the reserve. A hall was built in 1904 and by 1915, there were 34 houses, with a store operating from one house. In 1915, the growing settlement was renamed Seaspray, the only suggestion put forward. A school had operated in the hall during the summer months for some years, but in 1916 Prospect School was established near the reserve. It closed again in 1921 due to decreasing enrolments.

After World War I the surrounding property was divided into soldier settlement farms. Cropping and dairying were the main activities. Calves and pigs were raised, and cream was sent to Sale Butter Factory. By 1927, a school was again necessary. The previous building was relocated to the township and renamed Prospect Estate. It was 1975 before it was officially named Seaspray.

The town was predominantly a holiday resort, but from the mid-1960s, there was a significant increase in the number of permanent residents. Many of these newcomers were workers in the oil industry based at Sale. Growth slowed by the 1980s because of a shortage of building blocks.

Seaspray has suffered at least a dozen significant floods since 1916, the largest being in 1952 and 1978. Merriman Creek breaks out over the low lying land on which Seaspray is situated and sometimes this is compounded by tidal flooding. After the last severe flood the problem was studied and a number of flood mitigation measures implemented.

During holiday season the population is swelled by thousands of visitors, staying in holiday homes or in the foreshore caravan park. A surf life saving club, formed in 1955, patrols the beach during the summer. There are two stores and a new hall. Despite these influxes, Seaspray retains a low key, non-commercial atmosphere. An annual Country Fair festival is held on Australia Day weekend. A relocated caravan park site was opened in 2013 when it had to be moved from its site against the dunes of the Ninety Mile Beach to protect against coastal erosion.

Environmental concerns were raised in 2014 when Lock the Gate Victoria and other environmental groups rallied to protest the proposal by Lakes Oil to drill for gas at Seaspray. Although the gas was offshore they planned to drill onshore to access it.

Seaspray primary school had 19 pupils in 2014.

Census populations for Seaspray have been:

census date population
1921 156
1933 108
1954 94
1981 261
1991 233
1996 216
2006 186
2011 316