The town of Southbury was one of several towns formed out of a parcel of land purchased from the Paugussett Indians in 1659. It was originally part of Woodbury, which was settled in 1673. A new meetinghouse for the Southbury Ecclesiastical Society was built in 1733, and in 1787 the town of Southbury was incorporated. Although incorporated as part of Litchfield County, Southbury has been in New Haven county for most of its existence.

In the 1800s, water power became essential to the growth of Southbury's industries, which included mills, tanneries, and distilleries. The power for these industries came primarily from the Pomperaug River and the Housatonic River. As the industrial revolution progressed, many of these businesses left for Waterbury.

In the 1920s, Russian expatriates Count Ilia Tolstoy, son of author Leo Tolstoy, and George Grebentschikoff founded an artists' colony at the end of Main Street, known as Churaevka (or Russian Village). At its peak, Churaevka had a printing press used by Russian and Ukrainian scholars and novelists. Visitors to the colony included the composer Sergei Rachmaninoff. Most of its immigrant population is now gone, but St. Sergius Chapel, designed by Nobel peace prize nominee Nicholas Roerich and built in 1932-33, remains. Churaevka is listed on the National Register of Historic Places.

Southbury remained as a rural farming town for most of its history. However, with the development of the Eisenhower Interstate System, that changed. With the opening of I-84 through Southbury in or before 1963, Southbury gained easy access to New York and Hartford and improved its access to Danbury and Waterbury. Heritage Village opened in 1967, on a 1,000-acre (4.0 km²) site. In 1987, IBM built an extensive office and research building in Southbury, employing over 2,500 workers. Southbury was no longer a small rural farming town. Today, Southbury has approximately 17% open space, with a goal of 20%.