Motor racing on Phillip Island began in 1928 with a 100 Miles Road Race, an event recognised as the first Australian Grand Prix. It used a rectangular course of closed public roads approximately 10 miles (16 km) per lap for motorcycles. The circuit hosted the Australian Grand Prix through to 1935, when the final event took place on 6 May that year. A new triangular circuit using the pit straight from the original course debuted on 5 November 1935, and the last car race was held on Cup Day 1938 and the final motorcycle meeting on 30 January 1940.
In 1951 six local businessmen resolved to build a permanent circuit approximately 2 km from the original road course site. The new facility opened in 1952 and hosted the inaugural Armstrong 500 production car race in 1960. Extensive damage sustained during the 1962 Armstrong 500 forced closure; the circuit owners could not finance repairs and racing moved to Bathurst. The circuit lay dormant until 1967 when it reopened with a new surface for the Phillip Island 500 endurance race, which ran as a round of the Australian Manufacturers' Championship from 1971 to 1977. Declining maintenance standards led to a second closure in 1978. The land was purchased in 1985 and, after negotiation of a long-term lease and a complete rebuild — enabled by the reconstruction of the Phillip Island Bridge, which had previously prevented heavy resurfacing equipment from reaching the island — the circuit reopened on 4 December 1988 at a reduced length of 4.448 km.
The Australian Motorcycle Grand Prix joined the FIM Road Racing World Championship calendar for the first time in 1989 at Phillip Island. That inaugural race featured a dice between local favourites Wayne Gardner and Kevin Magee alongside Wayne Rainey and Christian Sarron, with 1987 World Champion Gardner winning to a large home crowd. Gardner repeated the victory in 1990 before the race moved to Eastern Creek in Sydney for 1991, where it stayed until returning permanently to Phillip Island from 1997. The contract for the Australian Motorcycle Grand Prix was extended until 2026.
Phillip Island hosted its first Superbike World Championship round in 1990, replacing Sydney's Oran Park Raceway as the Australian round of the series. Peter Goddard on a Yamaha FZR750 and Rob Phillis on a Kawasaki ZXR750 won the two races. The World Superbike round has continued annually at Phillip Island. In 2012, Australian Casey Stoner won his sixth consecutive Australian Motorcycle Grand Prix in what would prove his last career Grand Prix victory; the third corner of the circuit was named in his honour before that race. Michael Doohan's name was given to the first corner following his 1998 win at the circuit.
The track is known for its sweeping, high-speed layout, exposed coastal location, and variable wind conditions. The combination of fast flowing turns and the occasional gusting Southern Ocean wind makes tyre management and race strategy distinctive compared to most permanent circuits. The steep grade changes on the site, which caused cost overruns during the original 1952 construction, give the circuit elevation variety uncommon for a purpose-built permanent facility.
Current annual events include the World Superbike Championship round in February and the Australian Motorcycle Grand Prix in October, along with the Phillip Island Classic historic racing festival in March.
The Australian Touring Car Championship returned to Phillip Island in 1990 for the first time since 1977, Dick Johnson winning in a Ford Sierra RS500. Sprint rounds followed most years until 2004, and from 2005 to 2007 Phillip Island hosted the Grand Finale, the final championship-deciding round of the V8 Supercars season. From 2008 to 2011 the circuit staged a 500 km race, reviving the format of the old endurance classic, before returning to the sprint round format.