Coal was discovered near Colchester in the 1850s.
According to the North American Stratigraphic Code, rock units were given names that included the geographic name of a location where the rock unit was first described. If the rock unit consisted of a dominant rock type, the rock type was included in the name. In this case, when coal was first discovered and described in Colchester, Illinois, the rock unit was named "Colchester Coal". When this particular coal unit was encountered in a different location, the coal was correctly identified as Colchester Coal.
The mines in Colchester attracted immigrants from Pennsylvania. At first these included the descendants of Irish Protestant refugees from the Irish Rebellion of 1798. Later they were joined by Irish Catholic refugees from the Irish Potato Famine.
During the 1920s, Colchester was the home of Henry "Kelly" Wagle, a bootlegger associated with Al Capone. Wagle was involved in the production of alcohol and its transportation between Chicago and Kansas City.
On September 11, 1921, members of the disgraced Chicago Black Sox baseball team played with the Colchester team in a game against nearby Macomb. Kelly Wagle paid to bring the players to Colchester.