The village has its origins in 1785, when Sir Thomas Tyrwhitt, Secretary to the Prince of Wales, leased a large area of moorland from the Duchy of Cornwall estate, hoping to convert it into good farmland. He encouraged people to live in the area and suggested that a prison be built there. He called the settlement Princetown after the Prince of Wales.
Princetown is the site of Dartmoor Prison. At around 435 metres (1,430 feet) above sea level, it is the highest settlement on the moor, and one of the highest in the United Kingdom. The Princetown Railway, closed in 1956, was also the highest railway line in England, its Princetown terminus being above sea level.