The village of Mahomet was first settled in 1832 on the banks of the Sangamon River. It was the first community to be established in modern-day Champaign County. The original village name was Middletown, possibly because it is half-way between the towns of Danville and Bloomington. In 1871, the name of the village was changed to Mahomet because there was already another Middletown in Illinois, which was causing mail problems.

Most early settlers came from Ohio, Virginia, Kentucky, and Pennsylvania and chose to reside in Mahomet because there was abundant water from the Sangamon River and abundant trees. Currently, most residents commute 10 miles to the city of Champaign to work, although the village has a thriving small business district.