 Under manager and former player Brian Edgley, the club finished in last place and was demoted back to the Victorian Leagues, but not to the Victorian State League, which it had been a member of from 1974–76, but to the equivalent of a 3rd Division.As part of the requirements for all Victorian NSL clubs in 1977, they had to field a reserve side in the Victorian 2nd Division.Mooroolbark finished in a relegation spot and upon their return to Victorian competition the Victorian Soccer Federation saw fit that Mooroolbark should commence 1978 in the Victorian Metropolitan League 3rd Division (today's Victorian State League 3rd Division).