The Village of Potsdam is in the eastern part of the town and is northeast of Canton, the county seat.
The village was incorporated in 1831. In 1841, the village charter was amended to increase the size of the village.
Potsdam was the seventh town erected by an Act of the Legislature passed February 21, 1806, formerly attached to Madrid. It was one of the original ten townships, No. 3, and is said to have been named thus by the commissioners on the discovery by the surveyors of a bed of reddish sandstone resembling the Potsdam sandstone in the town of that name in Germany.
The Market Street Historic District, Bayside Cemetery and Gatehouse Complex, Clarkson Office Building, Clarkson-Knowles Cottage, Nathaniel Parmeter House, Trinity Episcopal Church, and United States Post Office are listed on the National Register of Historic Places.