The Skowhegan Falls, now the location of the Weston Dam, dropped twenty-eight feet over one half mile on the Kennebec River, and was once the territory of the Abenaki Indians, who had a settlement in Madison until 1724 when it was destroyed during Dummer's War. Prior to this time, the tribe fished in the area along Skowhegan Falls, as there were salmon and other fish in abundance. Consequently, their name for the place was Skowhegan, which means "watching place for fish."
The area was first settled by Europeans in 1773, when it was considered part of Canaan, and Colonel Benedict Arnold passed through the village in 1775 on his way to Quebec. On February 5, 1823, it was split off from Canaan and incorporated under the name of Milburn. However, the residents preferred the old Abenaki name of Skowhegan, and it was renamed in 1836. In 1861, the town annexed Bloomfield, across the river; and in 1871, Skowhegan replaced Norridgewock as the county seat.
Skowhegan's early farms produced hay and potatoes, primarily; and farmers also raised sheep for wool. The Skowhegan Fair was organized in 1818, and the first fair took place the following year. The Somerset and Kennebec Railroad reached Skowhegan in 1856, boosting the industry of the town as did Skowhegan Falls, which provided water power to its mills, several of which were built on Skowhegan Island alone, which separates the river into north and south channels. In the 1800s, the town had a paper mill, a sawmill, two flour mills, a wood pulp mill, three planing mills, a woolen mill, and factories producing sash and blinds, axes, scythes, shoes, harnesses and saddlery, and a foundry.
Skowhegan's shoemaking and textile industries were diminishing in 1986, when a large paper mill was constructed on the town line with Fairfield by the S.D. Warren Company, a division of Scott Paper Company, later sold to Sappi Fine Paper in 1997. The town's shoemaking industry continues, as New Balance Athletic Shoe Company continues to operate a factory in Skowhegan.
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