The town was named for James Hardie Cayce, who established stores in Moscow, Clinton, and Cayce. Cayce is centrally located in Kentucky's westernmost county, Fulton. The name is a homophone of "Casey" or "K-C".
The community includes the area east and west from Willingham Bottom and Bayou de Chien Creek to Mud Creek and north and south from Moscow to the Middle Road (Ky. 166). Part of the town, known as the "junction" is at the junction of highways 94 and 293. This is the location of the service stations and cafe. Also at that junction (on the northwest corner) is an old high school (now closed), with a monument out front identifying Cayce, Kentucky as the hometown of American cultural icon, railroad engineer Casey Jones (1863-1900), who grew up in the area.
Jones began work in 1878 for the north-south Mobile and Ohio Railroad (later the Gulf, Mobile and Ohio, and since the early 1970s a part of the Illinois Central Gulf Railroad); by 1890 he had worked his way up to engineer on the Illinois Central Railroad. John Luther "Casey" Jones earned his place in American folklore and legend for remaining at the throttle in the 1900 crash in which he lost his life.
In that era, railroaders with common surnames were often referred to by their hometown. John Luther Jones's nickname thus became "Cayce" Jones ("Casey" would later become the accepted spelling).
In the late 1800s and early 1900s Cayce was a thriving southern business town. Today, however it is a residential small town.