Inclusive education is a global priority and binding obligation for Australia to meet as a signatory to international human rights treaties. It is also supported by evidence as an effective model of schooling for all students and supporting those with disability. Yet segregation remains deeply embedded within the education systems of all states and territories and the Australian Government has indicated its commitment to retaining it. In this article, I present a policy analysis using the concept of path dependency to identify historical events that created this dual track of segregated and regular education settings as well as the mechanisms that maintain it. I show that eugenic anxieties were fundamental in the formalised creation of segregated education settings. I also show that their expansion was fuelled by the rise of disability assessments, particularly the assessment of intellectual disability, and remain embedded in current policy even when they are antithetical to its goals. I conclude with suggestions for how this might be overcome and what it might take to achieve an inclusive education system in Australia.