French trappers knew this area before it was permanently settled. The French referred to this place as "Bon Pas," which translates literally to "good step," Kentuckians modified the name to "Bone Pass," as though it were a "pass" through a mountain range. This was then changed to "Bone Gap," as in the Cumberland Gap.Bon Pas is actually the name of a nearby creek not the town.
An alternative story about the origin of Bone Gap's name involves a small band of Piankashaw Indians who established a village in a gap in the trees a short distance east of present day Bone Gap. Several years later early American settlers found a pile of bones discarded by the Indians near their encampment-hence the name Bone Gap as given to the white man's village established about the 1830s.
Early settlers in the area included the five Rude brothers who came from West Virginia in 1830. other families included the Morgans, Knowltons, Philips, Leachs, Gibsons, and Rices. In 1835-36 Ebenezer Gould and Elizabeth Gould went west with their twin sons, Philander and Ansel and with Daniel Bassett Leach, who later became the Bone Gap Methodist minister. Due to several members of the farming community coming from Northeastern states, they were referred to as "Yankees," and the community was referred to as "Yankeetown."
Old Bone Gap, as it was usually called, was situated a little more than one-fourth mile east of the present village limits. It was never incorporated as a village and consisted of a store and post office, the office of Dr. Fildes, a blacksmith shop, a Baptist church, a Methodist parsonage, and a few log dwellings.
On March 9, 1892 a petition was circulated for an election to incorporate as a village. On March 29 of that year thirty-eight votes were cast for incorporation and seven against.