The earliest maps, circa 1865, of the area surrounding the present Luna Park show a wasteland mostly covered by a lagoon.

The lagoon was drained in the 1870s and remained unoccupied in the 1880s.

The St Kilda Foreshore Committee was formed and held its first meeting on 22 June 1906.

The committee’s role was to promote positive use of the foreshore area and to manage the Crown Lands along the beach from Fraser Street in the north to Head Street in the south.

A vaudeville performer, Mr E. S. Salambo applied for a lease on the paddock next to Shakespeare Grove at this meeting.

On 2 November 1906 Mr Salambo opened Dreamland which was an outdoor amusement park situated approximately where Luna Park stands today.

Its attractions included Mt Fujiyama, The Rivers of the World, The Destruction of San Francisco, The Underworld, The Figure-8, a Grecian Theatre, an Airship and a Band.

The venture failed after three seasons, possibly due to its high entrance price.

Dreamland was demolished in 1909 but one ride, The Figure-8, located approximately on the site of the Palais Theatre, was popular enough to be retained. It was a primitive type of roller-coaster and remained until about WWI.

text found verbatim here: http://www.lunapark.com.au/early.html

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