New Fairfield's roots reach back to 1724, when twelve men from the town of Fairfield received approval from the Connecticut General Assembly to establish a new township here. They set out to negotiate with Chief Squantz of the Schaghticoke tribe for a large tract of land, but by the time they returned the following spring with paperwork to finalize the deal, the chief had died over the winter, and his four sons initially refused to honor the agreement. It took five more years of negotiation before a deed was finally signed in 1729, securing 31,000 acres for sixty-five pounds sterling, worth roughly $300 at the time.

The town was officially incorporated in 1740, governed at first by twelve original "Proprietors." A meeting house built in 1742 served double duty as both church and seat of local government until civil affairs formally separated from the church by 1759. Through the 19th century, New Fairfield thrived as both a farming community and, by the 1860s, a small industrial hub supporting a dozen local businesses.

Everything changed in the 1920s, when the Connecticut Light and Power Company flooded the valley below the 440-foot elevation line to create a pumped water storage reservoir for its Rocky River hydroelectric plant. The fill-up began in February 1928, and just seven months later, Candlewood Lake, Connecticut's largest lake, was born, permanently reshaping New Fairfield's landscape and its future.