Allen County, one of the 33 counties established by the first territorial legislature, was named in honor of William Allen, United States senator from Ohio. It was organized at the time of its creation in 1855, Charles Passmore being appointed probate judge; B.W. Cowden and Barnett Owen county commissioners, and William Godfrey sheriff. These officers were to hold their offices until the general election in 1857, and were empowered to appoint the county clerk and treasurer to complete the county organization.
The first white inhabitants located in the county during the early part of the year 1855. Richard J. Fuqua may have been the first, settling in the valley of the Neosho River, in the northwestern part of the county, with his wife, two boys, and three girls. B.W. Cowden and H.D. Parsons arrived in March and selected claims in the valley of the Neosho River, near the mouth of Elm Creek. The next settlement was made near the mouth of Deer Creek by Major James Parsons, and his two sons, Jesse and James, and Mr. Duncan. During the spring and summer settlement progressed quite rapidly, the most of it being along and near the Neosho River. Though many of the early settlers of the county were pro-slavery men, few slaves were brought into the county. The free-state people showing so much antagonism toward slave-holders, it was not long until most of the slaves were either liberated or taken from the county by their masters. During the summer and fall of 1856, immigration continued, though not in very large numbers.
The first town and county seat was Cofachique. In the spring of 1855 a party of pro-slavery men from Fort Scott formed a town company and laid out a town on the high land east of the Neosho River, south of the mouth of Elm Creek. There was a heavy trade with the neighboring tribes of Native Americans, and for a time the town had good prospects. But the town began to decline in 1857, and the greater part of it was later moved two miles (3 km) north to the new town of Iola.
After a series of disputes, Allen County's first jail was constructed in Iola in 1869 at a cost of $8,400. It operated until a replacement opened in 1959; since that time, it has been run as a museum.