Sherman was named after General Sidney Sherman (July 23, 1805 – August 1, 1873), a hero of the Texas Revolution. The community was designated as the county seat by the act of the Texas Legislature, which created Grayson County on March 17, 1846. In 1847, a post office began operation. Sherman was originally located at the center of the county, but in 1848, it was moved about east to its current location. By 1850, Sherman had become an incorporated town under Texas law. It had also become a stop on the Butterfield Overland Mail route through Texas. By 1852, Sherman had a population of 300 and consisted of a public square with a log court house, several businesses, a district clerk's office, and a church along the east side of the square. In 1861, the first flour mill was built.