Attracted by irrigable land and the available water supply in Dove Creek, farmers, sheepmen, and cattlemen came to this area in the 1870s. First to arrive were the Baze brothers, who dug an irrigation ditch in 1875 to grow melons and hay for nearby Fort Concho. Others soon followed, including cattleman Joseph Schmidt, cotton farmer S.D. Arthur, and the Ryan, Martinez, Jaques, Villareal, Soto, Byler, Atkins, Beck, Duncan, Foster, and Etheridge families. In 1877 New Yorkers Morgan and Lawrence Grinnell, Joseph Tweedy, and J.B. Reynolds drove their sheep into the valley. They named their ranch headquarters after Washington Irving's character Diedrich Knickerbocker.
The Knickerbocker post office was established in 1881. In 1889 the town was moved to a location just south of the original site in order to tap a new water supply. By 1890 the settlement had stores, hotels, saloons, blacksmith shops, two churches, and two schools.
As was typical of many West Texas rural areas, Knickerbocker declined with the advent of the automobile and improved road systems. Farmers left to find work in San Angelo (18 mi. NE). The settlers of Knickerbocker, however, left a rich heritage. Many of their descendants still live in the area.