The valley town was founded by Baptists from Rhode Island, the first settlers in the region who were not of the established Puritan Church. The early colonists were mostly descendants of those who had followed Roger Williams to Rhode Island in their quest for religious freedom. One of the prime movers of the emigration was Colonel Joab Stafford, who built his house on Stafford Hill and led the men of Cheshire into war during the Revolution. The troops from Cheshire distinguished themselves at the Battle of Bennington.
Cheshire was incorporated in 1793, and its residents were strongly partisan in the election battles of the country's early days. The election campaign which put Thomas Jefferson into the presidency was hard fought, and Cheshire was the only Berkshire town which favored Jefferson. When their candidate won the election, the town searched for a way to show their support and pay a tribute to their new president. Because Cheshire, like their namesake, specialized in dairying and making cheese, they decided to send a gift to the president of a Cheshire cheese, but one using curds from every farmer in town. The resulting huge cheese was in diameter, thick and weighed . It was moved on a sled drawn by six horses when it was shipped off to Washington, D.C., by water, where it drew a personal letter of thanks from President Jefferson. One of the two monuments in Cheshire commemorates the cheese; the other memorializes the founders of the town. The Pioneer Monument is on Stafford Hill and is a fieldstone replica of Benedict Arnold's Norse Mill in Newport, Rhode Island. The view from the monument is arguably one of the most beautiful views in the Berkshires.
The town had early forges and saw mills, grist mills and tanneries, and in 1812, the Cheshire Crown Glass factory opened, as did a triphammer operation. The town also boasted the first factory in western Massachusetts to manufacture cotton-making machinery.
The town's reputation for religious diversity continued, and in 1885 there were only 1,537 people in Cheshire but there were four different churches.
The rural town has been taking on recreational and residential overtones in modern times, with of open slopes and wooded trails for skiers on Farnhams. There was in the 1940s a straight run at the Cheshire skiing area. In addition, there has been good fishing in the South Branch of the Hoosic River, which originates in Hoosac Lake in the town.