The town was originally granted in 1760 as part of the New Hampshire Grants and named Bessborough. It was regranted by Vermont in 1786 as Dunmore, and settled the same year.
An early settler was Dr. Jonathan Arnold, a member of the Continental Congress and author of Rhode Island's act of secession from the United Kingdom in May of 1776. Arnold left Rhode Island in 1787 and, with six other families, built homes at what is now the town center.
By 1791, the village had grown to 143 inhabitants, and the first town meeting took place in Arnold's home that year, where the name St. Johnsbury was adopted. According to local lore, Vermont founder Ethan Allen himself proposed naming the town St. John in honor of his friend Jean de Crèvecœur, a French-born author and agriculturist and a friend of Benjamin Franklin (he was known in the United States as J. Hector St. John). According to this account, de Crèvecœur suggested instead the unusual St. Johnsbury to differentiate it from Saint John, New Brunswick.