The first permanent settlement south of the present Virginia line was made along the Watauga River in what is today the city of Elizabethton located in Carter County, Tennessee. Andrew Greer (father of Joseph Greer, later known as the "Kings Mountain Messenger"), an Indian trader, and Julius C. Dugger came to the area from Virginia around 1766. In 1770, after the collapse of the Regulator movement in North Carolina, sympathizers from that colony under James Robertson fled and established homes farther west on the Watauga River, effectively beyond the reach of the colonial authorities. In 1772 these settlements, along with settlements along the Holston and Nolichucky Rivers united and formed the Watauga Association government.
The Watauga Association was not intended to be a sovereign and independent of any existing state, although such a claim is sometimes made. The government adopted the existing laws of Virginia and set up a five-man court to handle local affairs such as lawsuits, marriages, wills, deeds, negotiations with Indians and colonial governments, and the establishment of a local militia for defense.
In 1771, North Carolina sent a surveying party into the region and reached a settlement with the Cherokee. The land agreement with the Cherokee placed the Watauga Settlement within Cherokee territory, and North Carolina’s government ordered the Wataugans to vacate the valley. Unwilling to leave, the settlers appointed a team of negotiators who met with the Cherokee, resulting in the 1772 lease the Watauga Valley.
At first the Watauga Association was thought to be within the bounds of Virginia, but a later survey determined it was in North Carolina, although neither colony had established any jurisdiction over the region. Shortly after the survey, the Watauga Association drafted the "Watauga Petition", pledging to assist North Carolina in the American Revolution and asking North Carolina to "annex" them and establish a regular government. The Watauga Association formally accepted North Carolina’s jurisdiction in October of 1775. In 1775 they organized as Washington District, and in 1777, were incorporated as Washington County in North Carolina. The Watauga Association, no longer needed, was dissolved in 1778.
In 1784 the Wataugans were part of another new, short-lived government, the State of Franklin, which collapsed by 1790, reverting to North Carolina. Shortly thereafter Washington County became part of the new state of Tennessee.
James Robertson remained in the Watauga area until 1779, when he led a settlement party to the banks of the Cumberland River in the Nashville Basin and founded Fort Nashborough, which later became Tennessee's capital, Nashville. Valentine Sevier, Sr., the father of Gen. John Sevier, Tennessee's first governor, came at about the same time as Robertson.
One of the first forts built in this region was Fort Watauga in the Sycamore Shoals area, said to be erected upon land owned by John S. Thomas, about half a mile northeast of the mouth of Gap Creek in today's Carter County. The Watauga Association also erected a crude building housing both a courthouse and jail nearby the Watauga Fort. The location of Fort Watauga is subject to dispute and there may have been several fortifications and blockhouses built for defense during the Revolutionary War and the related Chickamauga Wars
There are many stories about Fort Watauga and the Cherokee attacks on the Watauga settlements. While sometimes told as factual histories, the stories are closer to folklore and legend. The stories often contradict each other and contain self-contradicting or impossible details. The various stories, primary sources, and secondary histories are examined in detail by Brian P. Compton.
One such story has it that on the early morning of July 21, 1776, several women who had gone outside Watauga Fort to milk the cows were fired upon and soon all occupants of the fort were attacked at daybreak by a large body of hostile Cherokees. Fort Watauga was defended at the time by Robertson and then-Lieutenant Sevier with about forty men and some 150 additional settlers, including the entire garrison from Gillespie Station on the Nolichucky River below Jonesborough. The warring Cherokees were twice repulsed from Fort Watauga, but remained before the fort for six more days, at the end of which time the approach of reinforcements from other settlements along the nearby Holston River put them to retreat.