It was surveyed in 1871 as a result of demand for housing from those involved in the nearby Wallaroo Mines, forming one of four "occupation blocks" in the area.[5] An old resident claimed that the suburb was intended for "gentleman's residences" as opposed to the other occupation blocks, and that a "Councillor Rosenberg" had suggested Jerusalem as a name for an "aristocratic suburb".[6] In 1874, the local newspaper stated that "the name is not considered suitable to the place, and generally strikes the ear of a stranger as somewhat ridiculous", while the local Bible Christian minister stated that "dog-fighting, wombat and wallaby-hunting were the regular Sunday exercises, and sin had stamped its wretched impress upon the whole neighbourhood."[7][8]
A Bible Christian chapel opened at Jerusalem in February 1874.[8] The main Jerusalem football team merged with the Kadina club in 1908,[9] and the "Jews" football and cricket teams were later based at Jerusalem in the 1920s, competing in the local Kadina competitions.[10][11] The Jerusalem Methodist Church opened in January 1922, built by voluntary labour on a block of land donated by the Wallaroo and Kadina Mining Company.[12][13] The Jerusalem Sunday School began in March of the same year.[14] Prior to the church's opening, the Wallaroo Mines Gospel Mission Band had been holding open-air and cottage meetings at Jerusalem for three years.[15] It remains in operation as the Jerusalem Uniting Church.[16]