In 1923, Menlo Park wished to incorporate its lands to include the Fair Oaks lands. During a meeting of the representatives of the two communities, it became clear to the Fair Oaks property owners that in order to maintain their community as a strictly residential area, they would have to incorporate separately. Both groups rushed to Sacramento but the Fair Oaks committee arrived first. It was at that time they realized that they could not keep the name Fair Oaks, as it was already the name of a town near Sacramento. It was decided to honor Faxon Dean Atherton who had been one of the first property owners in the south peninsula and name the Town for him. Atherton was incorporated on September 12, 1923.
Faxon D. Atherton, a native of Massachusetts, had spent several years in Chile and Hawaii as a trader in tallow, hides and merchandise. His friend and business associate, Thomas Lark had written to him "there is education available for your children and a dignity of living on landed estates down the San Francisco peninsula (that is) convenient and accessible." Atherton purchased 640 acres (2.6 km²) for ten dollars an acre ($2470/km²)in 1860. His home, "Valparaiso Park", was built several years later. It was simple in design and ample for his family of seven children.
Because of the development of the railroad, other San Franciscans traveled south and established summer homes. Because the dirt roads were usually impassable in the winter, the families were only in residence from May through September.
Thomas H. Selby purchased 420 acres (1.7 km²). A successful businessman, he served as mayor of San Francisco. His country estate was called "Almendral". John T. Doyle, an attorney, built a home off Middlefield Road, "Ringwood". James C. Flood purchased successive parcels and built an extravagant mansion, "Linden Towers".This is now Lindenwood. The Joseph A Donohoe estate was "Holmgrove" and is now the site of Menlo Atherton High School. James Thomas Watkins' home was "Fair Oaks" and after two moves, stands restored today on Alejandra Avenue.
The government was established with Edward E. Eyre as the first mayor. In 1928, the residents voted to build a Town Hall, which stands today. The early residents wanted a Town that would be divided into large parcels and would not contain businesses. The author Gertrude Atherton, daughter-in-law to Faxon D. Atherton wrote in "The Californians", "Menlo Park (Atherton) has been cut up into country places for what might be termed the 'old families of San Francisco', the eight or ten families who owned the haughty precinct were as exclusive, as conservative, as any group of ancient country families in Europe." A few of the large land holdings were subdivided during the 1920s and 1930s, James Flood estate in 1938. In the 1940s and 1950s over eighty subdivisions were recorded. With the minimum size of one acre (4,000 m²), the era of the large estates was over. Atherton is still a "plain of oaks". Native live oaks, white oaks, bays, redwoods, cedars, pines and other ornamental trees cover the six square miles (16 km²) of town. There are approximately 50 miles (80 km) of roads. The population is around 7500 with approximately 2500 households.
By 1936, ridership on the Southern pacific Coast Line was sufficient that there were 23 round trips between Atherton and San Francisco, a distance of 28 Miles.
Olive Holbrook-Palmer left Holbrook-Palmer Park, a 22 acre (89,000 m²) park, to the Town in 1958. It is an open, tree-covered park, which offers recreational programs and has facilities for functions.
This is also the town of the fictional character Hillary Whitney from the 1988 film, Beaches.
According to the United States Census Bureau, the town has a total area of 4.9 square miles (12.8 km²), of which, 4.9 square miles (12.7 km²) of it is land and 0.04 square miles (0.1 km²) of it (0.61%) is water.
There were 2,413 households out of which 33.3% had children under the age of 18 living with them, 75.6% were married couples living together, 4.5% had a female householder with no husband present, and 17.8% were non-families. 12.8% of all households were made up of individuals and 7.5% had someone living alone who was 65 years of age or older. The average household size was 2.85 and the average family size was 3.06.
In the town the population was spread out with 23.7% under the age of 18, 7.2% from 18 to 24, 18.7% from 25 to 44, 30.3% from 45 to 64, and 20.2% who were 65 years of age or older. The median age was 45 years. For every 100 females there were 93.6 males. For every 100 females age 18 and over, there were 90.2 males.
The median income for a household in the town was in excess of $200,000, as is the median income for a family. Males had a median income of over $100,000 versus $68,393 for females. The per capita income for the town was $112,408. About 0.8% of families and 1.7% of the population were below the poverty line, including 0.6% of those under age 18 and 3.3% of those age 65 or over.
The median home value was at $1,000,001 at 2000. In 2005, Atherton's 94027 zip code was identified by Forbes magazine as the most affluent ZIP in the U.S.
Atherton and Hillsborough were the only two cities in San Mateo County in which a majority of residents voted for George W. Bush in the 2004 presidential election; however, it was by a slim margin of 50.54%-48.27%
Menlo College is a private four-year college.