The name of Douglas was first given to the territory of the town in the year 1746. New Sherburn or "New Sherburn Grant" had previously been its designation, since its first occupancy by the English settlers which was as early as 1715. The original settlers came primarily from Sherburn, although many hailed from Natick as well. New Sherburn was removed from Suffolk County (or Middlesex county?) to Worcester County at its formation on April 2, 1731. The name Douglas was given in 1746, when Dr. William Douglas, an eminent physician of Boston, in consideration of the privilege of naming the township offered the inhabitants the sum of $500.00 as a fund for the establishment of free schools together with a tract of 30 acres (12 ha) of land with a dwelling house and barn thereon.

Douglas's forests gave rise to a woodcutting industry and the Douglas axe company. A woolen manufacturing company, on the Mumford River in East Douglas, in recent times held by the Schuster family, has been prominent in the history of this community. General Lafayette, of France, stopped here during the Revolutionary War, to change horses, on his way to Boston to join General Washington. Lafayette was a hero of the American Revolution and the French Revolution.

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