Barnes Frisbie's History of Middletown, Vermont (1867, reprinted 1975) tells the early history of the town in great detail. About 1774 a few settlers, mostly from Connecticut, started coming into this area that lay in a fertile valley ringed about by high hills. A good sized stream promised power for mills that a new settlement would need. In increasing numbers they cleared land, built log cabins, prepared fields for planting, and laid plans for mills along the river. When news came of the war with England, many able-bodied men dropped everything and headed south. After the Battle of Bennington, they were mustered out in 1778-79 and came back, eager to take up their unfinished work.

As grist mills, tanneries, distilleries and saw mills were set up along the Poultney River, and as new settlers arrived, residents of the surrounding towns who lived closer to the new settlement than to their own village centers joined in the new venture. By 1783 this settlement, then parts of Ira, Tinmouth, Pawlet and Wells, held about 300 dwellers, and interest arose about organizing a new town. At a meeting that year, Joseph Spaulding, a native of Middletown, Connecticut, and surveyor by trade, was appointed to map out the borders of a town by following the surrounding hilltops and ridgelines. His survey embraced a six-sided area of some 23 square miles, made up of land from the four adjacent towns, and included the valley already dotted with new homesteads, farms and mills.

By the next year there were 44 freemen and perhaps 300 women and children. Five hundred and seventy four acres had been cleared, and the number of stock included 81 cows, 47 horses, 36 oxen, 80 steers, 73 other cattle and 22 swine. A meeting house was built, two church congregations established, grist and saw mills were operating and three frame houses had been built. By 1791 there was a population of 699, and by 1800 it had risen to 1066. At that time, the most prosperous period in the town's whole history, there were four grist and three saw mills, three distilleries, two or three clothiers, several mechanics' shops, two taverns and two stores. The town had become a central place for that part of Rutland County.

By 1810 the population had reached 1207, the all-time high. On July 11, 1811, a sudden storm arose that created such a heavy downpour that both the Poultney River and North Brook rose swiftly and swept away two houses and all but one of the many mills located along their banks. The livelihood of much of the town was carried downstream.

"A good many men were thrown out of employment," according to Frisbie. Several families moved away, and many others fell prey to an epidemic of illness probably caused by the flood waters. There were 20 burials in the local cemetery during the next two years. The population dropped by 168 between 1810 and 1820 censuses to 1039 residents. The period from 1820 to 1840 saw little change except for a financial recession in 1839, because of over extension of the "credit system," which slowed town business for several years. Population fell by over 340 from 1840 to 1860 to 712, the lowest in the 1800s. The farming industry remained strong, however, as smaller farms were consolidated into larger farms. Sheep raising was important with over 3,000 sheep counted in an 1835 census. Dairies became a major factor in the economy from the 1860's on, and the production of cheese was the town's greatest agricultural export.

The second half of the century, however, saw a series of events that gave Middletown gradual growth in wealth and population.

Inventions like the A.W. Gray horsepower treadmill and the new farm machinery that it operated were revolutionizing farming methods. The manufacture of this equipment produced an industry that supported the town for over 50 years, until the turn of the century, when the internal combustion engine began to replace the horsepower. The horsepower factory employed 30 men in 1867 as well as supporting loggers, sawyers, teamsters and other related tradesmen.

The development of the mineral springs and the Montvert resort gave a further boost to the town's economy. The springs were supposedly shown by Indians to the early settlers. Buried by the 1811 flood, they were uncovered by a "freshet" in 1868 and rediscovered by A.W. Gray, whose company owned the land. The strong mineral taste suggested that the water was therapeutic. This was confirmed by the experiments of a few neighbors with minor ailments. Soon two companies (later merged into one to build the Montvert Hotel) were bottling and distributing Middletown waters widely. In 1875 the town post office was renamed Middletown Springs and in 1885 the legislature granted a petition for the name to change officially.

In 1870 the Montvert Hotel was built near the Springs. With rooms for 350 guests, gas lighting, running water "conducted to every floor," fine food, an in-house orchestra, a bowling alley and other amusements, it claimed to be "one of the most pleasant and comfortable of summer resorts." It employed many people and brought business to the town's liverymen, merchants and physicians. Guests attended local churches and probably patronized the smaller boarding houses and other local businesses.

Perhaps its size and its splendor were the Montvert's achilles heel for its success was fitful and relatively brief. With high overhead, profits were slim. Managers and ownership changed frequently. The changing taste of the vacationing public may also have been a factor in the Montvert's decline. It closed just after the turn of the century and the building was demolished in 1906.

The town's eight district schools were consolidated in 1904 in a new building that accommodated as many as 130 students in grades first through twelfth. With the 1997 expansion, the building is still used by grades Kindergarten through sixth.

A.W. Gray's sons Leonidas and A.Y. carried on the business into the 20th century. With the advent of the gasoline engine, they attempted to "stay with the times" by purchasing the Ruggles Foundry in Poultney and manufacturing the Ruggles engine as the Gray engine to power improved versions of the Grayline thresher. They were forced into bankruptcy in about 1918 and the savings of many were lost with the closing of the Gray Bank.

A disastrous fire in 1920 that took four prominent buildings opposite the Park on East Street further demoralized the town.

Modern, large scale dairy farms were developed by J.E. Buxton and his son B.C. Buxton and by Charles Copeland, leading the local dairy economy in the early part of the century.

A business continuing the Gray name made clothes pins and wooden toys during the 1920s in the horsepower factory building, but closed down during the Depression and the building was demolished. On its site in 1940 was built the Rutland County Co-Operative Creamery, which processed tested milk from as many as 140 farms in Rutland County and Washington County, New York. Farms gradually pulled out of the cooperative to sell milk directly to bottlers, smaller farms quit selling milk as the dairy industry required the use of refrigerated bulk tanks and other expensive equipment. The Creamery closed around 1970, and the building was later demolished.

Unlike in earlier years, Middletown Springs is no longer the center of commercial and social activities for the surrounding area. It is a rural residential community with an increasing number of home-based businesses. However, many residents work, shop and socialize elsewhere.

In 1984, through the efforts of the Historical Society trustees and other interested townspeople and the allocation of necessary funds by the voters, much of the village of Middletown Springs was designated a Historic District. The District includes 65 residences, six public buildings and six other structures. While identifying significant historic resources in the town, National Register for Historic Places designation does little to protect or otherwise affect these structures without locally approved design review ordinances. Later, 31 additional sites outside the village including eight farms, comprising approximately 67 structures, were added to the Vermont State Register of Historic Places.