The township was formed from Quincy Township by the Michigan Legislature on April 2, 1838. The first township meeting and election were held at the house of Horace Purdy early in May 1838. In their petition to the legislature, the settlers suggested the name "Carlton", but the legislature, without explanation, instead selected the name "Algansee". It is thought the name was an invention of Henry Schoolcraft, who had similarly invented the names of many other Michigan counties and townships by blending elements from diverse Native American languages with other languages such as Latin and Arabic. The precise origin and intended meaning is unknown.