Previous to its incorporation it was "the Second Parish of Lancaster," and was commonly called by a portion of its Indian name, Chocksett. The original Indian name of the area being Woonsechocksett. The land encompassing the Chocksett region was not originally included in the first land sold by the great Indian Chief Sholan to the settlers of the Lancaster grant. However, Sholan's nephew Tahanto would eventually sell the Chocksett land to inhabitants of Lancaster in 1713.

The first white settlers arrived in Chocksett seven years later in 1720, formerly inhabitants of Lancaster proper. Among these first settlers were families such as Beman, Sawyer, Houghton, and Osgood; names reflected to this day in the names of Sterling's oldest roads.

A short time after settlement, in 1733, the residents of the Chocksett area requested its own incorporation, separate from Lancaster, due to the "great inconvenience" of a long distance to the church in Lancaster's center. This request was denied. However, by 1780 the population of Chocksett was so numerous as to constitute a majority, and so the voters of the area voted out the existing Lancaster town officers and began to conduct town business and meetings in Chocksett. This was enough to convince the rest of Lancaster that it was now time for Chocksett, the Second Parish of Lancaster, to go its own way.

In 1781, Chocksett was incorporated as its own town: Sterling. The town derives its name from General William "Lord Stirling" Alexander, a Scottish expatriate, who served valiantly under Gen. George Washington in the New York and other campaigns. His portrait hangs in the town hall, and the town commemorated Alexander with a medallion during its bicentennial celebration in 1976. A duplicate portrait resides in the town hall of New Windsor, NY.

Residents recently approved and built new facilities for the police and fire departments. The town enjoys a low crime rate even though it has large metropolitan areas both north and south of its borders.

According to the United States Census Bureau, the town has a total area of 31.6 square miles (82 km²), of which 30.5 square miles (79 km²) is land and 1.1 square miles (2.8 km²), or 3.42%, is water.

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