The town appears in the Domesday Book of 1086 as Tachesteda, Old English for "place where thatch was got." Once a centre of cutlery manufacture, Thaxted went into decline with the rise of Sheffield as a major industrial centre. The name of Cutler's Green, a small hamlet about a mile to the west of Thaxted, recalls the trade that yielded the area's early wealth. Just to the west of Cutler's Green is the mysteriously named Richmond's in the Wood.
Thaxted's population has remained almost unchanged down the centuries, hovering near the 2,000 mark. In 1829 there were 2,293 people living in Thaxted; in 1848 there were 2,527. At the time of the 1881 census that figure had fallen to 1,914, and fell further by 1921 to 1,596. In 2001, the population was 2,526.