With regard to the Australian Shepherd, various theories have arisen: that it is of Australian origin; that it is really a Basque breed; that it is of old Spanish origin. Investigations indicates that none of the above provides the whole story, but together they may play a part.

Histories of California relate that although there had been many flocks of sheep at the Spanish missions, the number of sheep in the Far West had greatly declined by the time of the Gold Rush at the end of the 1840’s. The Gold Rush and the Civil War brought about a great demand for mutton and wool. To meet this demand, large flocks were driven to the Far West from the Midwest and from New Mexico. Sheep were brought around the Horn from the Eastern states, and imported from Australia. Dogs accompanying these flocks, along with later arrivals, would figure in the background of the Australian Shepherd.

Dogs coming with flocks from the Midwest and East were largely of the old-fashioned collie type, often called shepherds, which came to America with settlers from the British Isles. Collies and shepherd dogs came to the West not only from the East and Midwest but also directly from Britain. The collie of those days, a strong, multi-purpose working dog, had a more upstanding style of work with a looser eye than its working descendant, the Border Collie was rarely sable in color, but was usually black with white and/or tan markings, or blue merle.

The dogs which helped bring flocks from New Mexico were largely of Spanish origin. Old accounts describe the New Mexican sheepdogs as large, powerful guardian dogs, wolfish in aspect and generally yellowish-white in color, with some accounts mentioning black and tan.

These dogs were primarily guardians with some guiding behaviors. Dogs of this type were undoubtedly present in Spanish California as well. The rise of the sheep industry in the American West in the 19th century was accompanied by a changeover from the New Mexican sheepdog to the collie and shepherd types which were brought in by the settlers and ranchers in abundant numbers. As the dogs of British background came into the West, interbreeding took place with the Spanish strains, much as the Spanish horses of the West were bred with the Thoroughbreds and other Eastern breeds of the later settlers. The principal requirement for herding dogs was the ability to do the job. By the later 19th century, however, the British influence predominated.

Dogs of similar type and background imported from Australia came to be called Australian Shepherds in the American west, although that name was not used in Australia for any breed. Rather, the name was applied in America to dogs coming from Australia. Although only a small proportion of working dogs in the American West were of Australian origin, and merle coloring occurred in the non-Australian dogs, perhaps the connection between Australia and merle shepherd dogs came about in this way: People seeing sheep from Australia being unloaded at their destination may have noticed merle dogs accompanying the flocks. They then associated that color and general appearance with similar herding dogs in the area, irrespective of the actual background of individual dogs, calling such dogs in general Australian Shepherds. It has been very common for people to take color to signify a breed.

Over time, the name Australian Shepherd began to occur more frequently among dogs in the West. An Australian Shepherd appeared in a dog show in Idaho in 1905. Lost and found ads mention Australian Shepherds of various colors, for instance a black and white pup found in 1911, and there are want ads with Australian Shepherds in newspapers in California, Nevada, and even Alberta, Canada, with mentions of these kinds becoming more frequent through the 1920s.