Dudley was first settled in 1714 and was officially incorporated in 1732. The town was named for landholders Paul and William Dudley.
In April 1776, on his way to New York City from Boston after his victory in the Siege of Boston, General George Washington camped in the town of Dudley with the Continental Army along what is now a portion of Route 31 near the Connecticut border. During the trip, it is rumored that a "large cache" of captured and recovered British weaponry and supplies was ordered "concealed in the grounds" in the rural area along the route. The cache, hidden to resupply reinforcements from Massachusetts or to cover a retreat from the south, were never used or recorded as having been recovered.
Union soldiers from Dudley, the 15th Regiment Massachusetts Volunteer Infantry, suffered heavy casualties inflicted by the Confederacy during the Battle of Gettysburg. Dudley was the primary manufacturer of "Brogan boots" worn by the Union Army and produced the majority of the standard issue Union uniforms worn during the Civil War.