Originally part of New Fairfield, which was purchased from the Indians in 1729, the area then known as the Upper Seven Miles was separately incorporated as the Town of Sherman in 1802.
The town was named for Roger Sherman who, as a young man, had a cobbler shop at the north end. He was to become the only statesman to help draft and sign all of the following documents: the Articles of Association, the Declaration of Independence, the Articles of Confederation, and the United States Constitution. A native of Sherman was Philo Penfield Stewart, missionary to the Choctaw Indians, inventor of the Stewart stove, and in 1833 a founder of Oberlin College in Ohio.
The Character of the town as a farming community devoted to dairying, grazing, and tobacco-growing changed after 1926 when, for hydroelectric power, eight hundred acres of Sherman land were flooded in the creation of Lake Candlewood.