Casselton had its origin in 1873 when the Northern Pacific Railway sent Mike Smith to plant cottonwood and willow trees in the area to serve as windbreaks along their right-of-way. When the trees grew to maturity, railroad ties were to be cut from the wood. The experiment failed for a number of reasons.

The hamlet was variously called "the Nursery", "Goose Creek" and "Swan Creek", named for the stream that meandered through the area. In 1876, the railroad established a station called Casstown, after George Cass, the railroad president. A post office was put in place in August 8, 1876 when the name Casselton was designated.

In 1874, Emil Priewe and his wife joined Mike Smith at the station. The Priewe's son, Harry, was born on March 28, 1875 in a sod shanty, as the first child born in Casselton. Others came to settle and by 1880, the town had a population of 376, according to the official census. A school was organized in 1876 and the town was incorporated as a village in 1880.

During the 1870s, George Cass and Peter Cheney traded their railroad stock for 10,000 acres of land near Casselton and decided to develop this acquisition as one large farm, rather than dividing the land into small tracts. They employed Oliver Dalrymple, of southern Minnesota, to head the operation. The venture became highly successful and proved that the prairie was very suitable for agriculture.

Various means were used to attract people from afar to become farmers, tradesmen, and professionals, which resulted in Casselton's population to reach 1365 in 1885.

The Great Northern Railway had an additional influence in the growth of Casselton. Several branches radiated from the city. The railroad excavated a reservoir to supply water for its steam engines. In 1906 the railway constructed a round house and service center which operated until 1920. In the 1920s, railroad personnel were transfered to other locations, and as a result, the population of Casselton fell 285 persons between 1920 and 1930.

Casselton installed a city water and sewer system in the mid 1920s. Water was pumped from artesian wells, and stored in a standpipe which was located on the east part of town. Today, that site is used as a winter skating rink. The standpipe was 110 feet tall and looked like a gigantic culvert and remained in place until 1956.

By 1957, the Great Northern Railroad no longer had a need for the Casselton reservoir, and they deeded the 73 acres of land, which encompassed that body of water, to the City of Casselton. The reservoir was developed to be used as a municipal water supply until March 1978 when the city's water started to come from the Leonard Phase of the Cass Water Users System. The reservoir area has since been developed into a recreational center with softball diamonds, tennis courts, picnic tables and the like.

The streets of Casselton have been improved by leaps and bounds. In 1927, the downtown roads were graveled. In 1930, as a WPA project, State Highway No. 18 through the city was paved. After World War II, the business district streets were paved with concrete. Since that time, all streets and avenues have been hard-topped and a modern storm sewer system was installed at the same time.

The 1996-1997 school year opened with a newly completed, nearly eight million dollar Central Cass Public School building. It replaced a three story building on the same site, that was dedicated in 1912 and costed $50,000. The school district covers nearly 400 square miles, and attracts over 800 students. Because of the continued growth, an addition to the school complex was completed in time for the 2003-2004 school year.

The most recent census figures place Casselton's population at over 1800. Because of its location in relation to the Fargo-Moorhead area, many residents prefer the "small town" environment while being employed elsewhere. Consequently, a housing development is taking place, particularly in the five segments of the Cottonwood Additions at the southern end of Casselton.

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