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Stephen Murray-Smith was born and educated in Melbourne, attending Geelong Grammar and the University of Melbourne. After serving in New Guinea during World War II, he lived in London and Prague for several years before returning to Australia. Murray-Smith was a member of the Communist Party of Australia for thirteen years and was active in many organisations, including the Australian Peace Council and the Melbourne Realist Writers Group.
In 1954 Murray-Smith founded the magazine Overland and continued as its influential editor for the remainder of his life. Despite attracting little government patronage, the magazine survived its early years primarily because of Murray-Smith's enthusiasm. Established to provide a medium for working-class writers to reach a working-class audience, Overland has assisted and nurtured the careers of many Australian writers.
Murray-Smith edited a variety of books, including the extensive Dictionary of Australian Quotations (1984), and published criticism, autobiography and an account of his visit to Antarctica. He was a reader in Education at the University of Melbourne, editing the series Melbourne Studies in Education until 1982. He was made AM in 1981.
Stephen Murray-Smith died in 1988. A collection of tributes was published in Overland's October 1988 issue.