Pottsboro was established in 1876 by James A. Potts, a pioneer settler who donated land for a town and a right-of-way so the Missouri–Kansas–Texas Railroad would extend its tracks westward from Denison to his settlement. The community, no doubt aided by its status as a stop on the railroad, grew rapidly for the rest of the 1800s. It incorporated in 1880 with the name "Pottsborough", and by 1885, its population had reached 200 and it supported a cotton gin, several gristmills, and a number of churches. Pottsboro suffered devastating fires that destroyed a great deal of the business section of the town: 1890, 1902, 1923, and 1924. Father-in-law of J.A. Potts, Judge James G. Thompson, applied for a post office in 1891, when they responded, the "ugh" was dropped from the name by the federal government, and the town's name finally became "Pottsboro". A post office opened there in 1891.