The 5,000 acres originally comprising both Newtown Borough and Township were part of the vast tract purchased by William Penn from the Indians by William Markham, Penn's agent, on July15, 1682. Penn originally called this area his "New Town" which eventually evolved into "Newtown". Newtown was the county seat of Bucks County from 1726 to 1813 before it was moved to Doylestown. The town was patterned to resemble an open fan surrounding a narrow rectangular piece of property called the town common. The plan of the township and townstead were surveyed by Thomas Holme in 1684 and the boundaries that appear on his map of that date remain essentially the same today. 

Newtown was the scene of some very important events during the Revolutionary War. On Christmas morning 1776, Gen. George Washington marched from his headquarters to join the Battle of Trenton. Gen. Washington made his headquarters in Newtown after the Battle of Trenton and the famed crossing of the Delaware River and before the Battle of Princeton, where he penned his two famous letters to Congress describing his victory at Trenton. The house that Gen. Washington chose as his headquarters stood on South Sycamore Street until it was razed in 1962, thus providing the motivation to form the Newtown Historic Association.

Newtown was the County Seat of Bucks County from 1726 to 1813, before it was moved to Doylestown. During this period, this rural community grew into a prosperous governmental center, leaving behind its origin as an essentially agricultural village. Because a substantial amount of town and county business had revolved around the courthouse trade, taverns and inns became staples in the local scene.

As the 19th century progressed, the community remained a busy commercial and cultural center for the surrounding farms. After the County Seat was relocated in 1813, Newtown was gradually transformed back into the tranquil pastoral town it once was. In addition to the many historic homes and businesses that line the streets today, one can still sense the industrial and agricultural activity that thrived here so many years ago.