Goldthwaite was born from a railroad land auction in 1885

In 1885 the Gulf, Colorado and Santa Fe Railway laid tracks into what is now Mills County. A railroad official named Joe G. Goldthwaite ran the auction of town lots, and the new settlement was named after him. The post office opened in 1886. Mills County was formally organized the following year, carved from parts of Brown, Comanche, Hamilton, and Lampasas counties.

The railroad planned Goldthwaite as a division point, but relocated its shops to Brownwood after a labor dispute. Despite that setback, the town grew into the county seat it remains today. The original 1888 county jail is listed on the National Register of Historic Places.