The land was part of Shepardsfield Plantation (also called Bog Brook Plantation), granted on March 8, 1777 by the Massachusetts General Court to Alexander Shepard, Jr. of Newton, Massachusetts. On March 6, 1792, the plantation was incorporated as Hebron, with Oxford its southwesterly portion. First settled in 1794, Oxford was set off and incorporated on February 27, 1829. It annexed land from Otisfield in 1830, and Paris in 1838.
Farmers grew mostly hay, and the town became noted for cattle. Mills were established at 2 water power sites; these developed in the 19th-century into principal villages within the town, especially after the arrival of the Grand Trunk Railway in the 1850s. Welchville was located on the Little Androscoggin River, where the woolen textile mill of the Harper Manufacturing Company was established. At the outlet of Thompson Lake was Oxford village, first called Craigie's Mill for the sawmill and gristmill built by Andrew Craigie, a Boston apothecary and land speculator. Here would be erected a barrel stave mill, shovel handle factory and the woolen textile mills of the Robinson Manufacturing Company. The train brought seasonal tourists to Thompson Lake, where inns and hotels opened. Today, Oxford is a recreational area with fine architecture remaining from its prosperous mill town past. The Congregational Church, built in 1842-1843, is listed on the National Register of Historic Places.
As of the census of 2000, there were 3,960 people, 1,487 households, and 1,094 families residing in the town. The population density was 102.3 people per square mile (39.5/km²). There were 1,926 housing units at an average density of 49.8/sq mi (19.2/km²). The racial makeup of the town was 97.88% White, 0.25% Black or African American, 0.25% Native American, 0.28% Asian, 0.03% Pacific Islander, 0.23% from other races, and 1.09% from two or more races. Hispanic or Latino of any race were 0.63% of the population.
There were 1,487 households out of which 36.0% had children under the age of 18 living with them, 58.8% were married couples living together, 9.1% had a female householder with no husband present, and 26.4% were non-families. 19.0% of all households were made up of individuals and 8.2% had someone living alone who was 65 years of age or older. The average household size was 2.66 and the average family size was 3.00.
In the town the population was spread out with 26.5% under the age of 18, 6.6% from 18 to 24, 30.4% from 25 to 44, 24.4% from 45 to 64, and 12.1% who were 65 years of age or older. The median age was 38 years. For every 100 females there were 96.6 males. For every 100 females age 18 and over, there were 94.5 males.
The median income for a household in the town was $36,670, and the median income for a family was $38,438. Males had a median income of $27,957 versus $20,392 for females. The per capita income for the town was $15,480. About 2.8% of families and 7.1% of the population were below the poverty line, including 4.6% of those under age 18 and 12.0% of those age 65 or over.