Following significant machinery of government changes after the re-election of the Kennett Government in April 1996, the Department of Natural Resources and Environment (DNRE) was established on 3 April 1996 by amendment to Schedule 1 of the Public Sector Management Act 1992.
Under Administrative Arrangements Order No.150, the new Department assumed responsibility for most of the functions of the Department of Agriculture, Energy and Minerals (VA 3744) and the Department of Conservation and Natural Resources (VA 3097), as well as the Surveyor-General, Valuer-General, and Office of Geographic Data from the Department of Treasury and Finance, Land Titles from the Department of Justice and the Salinity Bureau from the Department of Premier and Cabinet.
At its creation, DNRE reported to the Minister for Agriculture and Resources and the Minister for Conservation and Land management. It was divided into 7 divisions which were responsible for the following functions:
Catchment Management and Sustainable Agriculture
Responsible for the development of policies and programs that ensured sustainable development, protection of Victoria's land and water resources and the control of pest plants and animals.
Responsible for issues associated with the sale of Victoria's timber resources, including investigating new markets and establishment of state-wide price structures for all wood products.
Collected, maintained and disseminated land-related information for Victoria and had a major role in the management of Crown Land, including registration, survey and valuation of land.
Parks, Flora and Fauna
Responsible for National Parks in Victoria as well as for standards relating to flora and fauna. This included the conservation of native flora and fauna in Victoria.
Minerals and Petroleum
Responsible for the exploration and development of the state's mineral, petroleum and other earth resources.
Responsible for veterinary and animal welfare services, fisheries, and agriculture.
Responsible for the provision and maintenance of water within Victoria, including water supply and sewerage services and associated infrastructure.
In addition, the Department was also divided into a number of Regional services areas, in order to provide advice and management to rural and regional areas.
In 2002, following the re-election of the Bracks government, DNRE was renamed the Department of Sustainability and Environment under section 10 of the Public Sector Management and Employment Act 1998. A new department, the Department of Primary Industries, was established under Section 11 of the Public Service Management and Employment Act 1998. These changes were both published in the Victorian Government Gazette No. S231 on 5 December 2002. These changes effectively abolished DNRE and split its functions between the two new departments. The Department of Sustainability and Environment (VA 4554) assumed responsibility for functions relating to forestry, heritage, the environment, land and water management, planning, plants and animals and conservation. The Department of Primary Industries (VA 4563) assumed responsibility for primary production and resources.