Bethany was first settled in 1717, but it was not until May 1832 that Bethany separated from Woodbridge to become incorporated as a town. This slightly remote, sparsely populated, residential town retains its rural character. There is some dairying and agriculture. The town is dotted with reservoirs serving Naugatuck and, principally, New Haven.

There have been inhabitants in Bethany since before 1638, predominantly Naugatucks of the Paugusset tribe and Mattabessitts of the Wanguck tribe. The first European settlers arrived in the area around April 1638, creating the towns of Milford and New Haven, with their boundary split down the middle of what is now Bethany. The area of the boundary was settled in 1678, twelve years after New Haven County was organized. In 1717, the Amity Parish was accepted by the General Assembly of the Connecticut Colony and in 1832, Bethany was incorporated as a town. The town is named after the biblical place.

In the mid-to-late 19th century, the population of the town and the land decreased as parts were annexed by the neighboring town of Woodbridge and the new town of Beacon Falls was incorporated into the general geography of Connecticut. The population would continue to decrease until about the 1940s, when the population would spike.

In 1923, the Bethany Airport opened up, one of the first in New England. Soon after, Troop I of the Boy Scouts of America was chartered in Bethany, and an organized police staff and volunteer fire fighter organization were founded. In 1954, a senior high school was built in Woodbridge to serve Woodbridge, Bethany, and Orange. Earlier Bethany students had been sent to public high schools in neighboring towns as tuition students for grades nine through twelve. In 1963, Amity Junior High School was created in Bethany.

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