Rosewood was settled in 1847, nine miles (14 km) east of Cedar Key, near the Gulf of Mexico. Most of the local economy drew on the timber industry; the name Rosewood refers to the reddish color of cut cedar wood. Two pencil mills were founded nearby in Cedar Key; local residents also worked in several turpentine mills and a sawmill three miles (4.8 km) away in Sumner, in addition to farming of citrus and cotton. The hamlet grew enough to warrant the construction of a post office and train depot on the Florida Railroad in 1870, but it was never incorporated as a town.