Sassafras is a locality and township within Greater Melbourne beyond the Melbourne metropolitan area Urban Growth Boundary, 43 km east of Melbourne's central business district. Its local government area is the Shire of Yarra Ranges. At the 2006 Census, Sassafras had a population of 968. It is located at an altitude of approximately 500 metres, near the top of the ridgeline of the Dandenong Ranges, a few kilometres south of the highest peak of Mount Dandenong.
The area was named Sassafras Gully, after the trees which grew in the area. The land was opened to small scale farming in 1893 and a small township developed. The Post Office opened on 1 June 1901 and has always been known as Sassafras Gully. In the early 1900s tourism began to increase and the township consequently grew. Today Sassafras is a tourist destination with several boutique stores including Devonshire tea outlets, antique shops and nurseries.
The area has had a history of bushfires, and areas near the town are known to have been burned out since the 1850s.