The area was possibly named after a native Delaware chief named Straw or Strawbridge. Indian Strawtown was located across the river 1.5 miles to the east and north of present-day Strawtown. Miami and Shawnee tribes invited the Delaware to settle in the White River basin after a 1795 treaty. Indian Strawtown was one of 14 Delaware villages established along the West Fork of the river.
In 1821, a minimum purchase of 80 acres per speculator was offered at a price of $1.25 and acre. The following year, five Strawtown settlers went to the Brookville land office and purchased tracts at that price. By 1836, roughly 30 families had purchased land in this area.
A post office was opened in 1834 and closed in 1915. It was originally established upstream in Stevensburg on October 13, 1829, as one of the earliest posts in the territory.
William Foster’s saw mill was established two miles downstream in what is now Clare. Lumber was bound and floated like a raft down towards Noblesville and Indianapolis.
Doctor Amos Palmer organized and taught the first school in Strawtown during the winter of 1822-23. The county was separated into two equal townships in 1823, White River to the north and Delaware to the south. Rapid growth, spurred partly by the state’s plans to run the Central Canal through Strawtown, caused the creation of seven additional townships. The canal in that area never materialized and growth stagnated, thanks in part to the location of the nearest railway four miles to the west.