Established on April 8, 1874 on land that the Galveston, Harrisburg and San Antonio Railway acquired from William Alexander Faries (the family name is also spelled "Ferris" and "Farris"), the community was named after F. W. Flato, a local merchant and one of the first settlers, of whom most were Anglo American. Residents placed their homes in the former Flatonia settlement, one mile southeast of the current Flatonia, and in the community of Oso, northeast, on wagons and moved to the new location. The post office, established in the former Flatonia in 1870, moved to the new Flatonia with the same name. Flatonia was incorporated on November 10, 1875, and held its first election on December 6 of that year. In 1878 the town had 800 residents and an economy dependent on cattle and cotton.