Millinocket was first settled in 1829 by Thomas Fowler and his family, who cleared land for a farm. When the Bangor and Aroostook Railroad extended service to Houlton in 1894, the line ran through the area, opening it to development. Charles W. Mullen, an engineering graduate from the University of Maine, proposed a hydroelectric dam on the Penobscot River. He recognized the falls as an ideal water power source to operate a large pulp and paper mill. Mullen contacted Garret Schenck, vice-president of the International Paper mill at Rumford Falls and an expert in the industry, about building a pulp and paper mill near the dam. Mr. Schenck agreed, and set about obtaining the necessary financial backing.
After securing land rights, the chosen site was at the junction of the West Branch of the Penobscot River and Millinocket Stream, where it stands today. Things moved quickly, and on May 15, 1899, construction began on the Great Northern Paper Company mill. As the location was not near existing towns, it became necessary to build one. Millinocket, meaning "the land of many islands" after all the islands in the Penobscot River, was incorporated on March 16, 1901.
Garret Schenck contracted bonded labor, especially stonemasons from Italy. The term "bonded" in this case referred to the fact that the Italians owed for the passage to America and were in debt the minute they set foot in this country. Italian masons were largely responsible for the construction of the Millinocket mill.
Throughout the 20th century, the community prospered. It developed a reputation as a small but successful rural town, mostly due to the paper industry, but also to its proximity to Katahdin, Maine's tallest mountain, and Moosehead Lake, Maine's largest lake.
In early 2003, however, Great Northern Paper announced it had filed for bankruptcy protection for its Millinocket and East Millinocket mills. Since then, the mill town has struggled to reshape its economy, while receiving significant help from the state government and local economic development efforts. Shortly after closing the mills, a Canadian corporation purchased the bankrupt paper mills in both Millinocket and East Millinocket. Currently, the paper mill employs over 200 workers in East Millinocket Mill only. In additional to the traditional forest products industry, Millinocket has been growing a service economy, and has grown into a major four-season tourist attraction. The region is served by the Millinocket Municipal Airport, which sells both 100LL avgas and jet fuel.