Melbourne joined Collingwood, South Melbourne, Essendon, Fitzroy, Geelong, St Kilda and Carlton in breaking away from the VFA to form a new competition. Throughout season 1896 there had been much talk of rule changes to 'save football' as attendances fell despite the most even competition in many years.
Changes for the first season of the VFL included reducing teams to 18 players a side, introducing the "behind" as a score, allowing the push in the back and forcing players to kick the ball 10 yards for a mark. After the new push in the back rule proved disappointing on the first day of the season the league delegates met before Round 2 and reversed their stance.
With only five of the eight teams serious finals contenders Melbourne finished third comfortably, but lost all three of their finals games to finish at the bottom of the premiership playoff ladder. Suffering from injuries they lost to Collingwood, Geelong and Essendon by 2, 9 and 6 points respectively - with the 1.8 to 0.8 margin in the last game standing forever as the lowest scoring finals match.
The Fuschias played their part in VFL history by losing to Essendon in the last sectional final and handing their opponents the premiership without the need for a playoff. Had they won Geelong would have faced Essendon in the first ever "Grand Final".
A charity exhibition match was meant to be played against Collingwood on Saturday 14 August but the game was called off due to heavy rain. The cancellation of that weekend's games allowed the league to make a late change to the way that the premiership would be decided, having a four team round robin instead of a knockout as previously planned.