Sherman's story is genuinely tied to one of the country's Founding Fathers. In 1743, a 22-year-old Roger Sherman moved with his family from Massachusetts to a settlement then known as New Dilloway, in what is now northern Sherman, working alongside his father as a shoemaker and surveyor before moving on to nearby New Milford a few years later to study law. Sherman would go on to become the only person in American history to sign all four of the nation's founding documents: the Continental Association of 1774, the Declaration of Independence, the Articles of Confederation, and the U.S. Constitution.

The area itself was originally part of New Fairfield. As the northern seven miles of that town grew more populated, residents established their own congregation and meetinghouse around 1744. Sixty years later, in October 1802, they successfully petitioned the Connecticut General Assembly for independence, and the new town took the name Sherman in honor of its brief but formative connection to the statesman.

Farming, particularly dairy and tobacco, along with mills for timber, cider, and grain, sustained Sherman's economy through the 19th century. In the early 1900s, the construction of Candlewood Lake permanently changed the town's southern landscape, flooding former farmland and creating the recreational identity Sherman is known for today.