Chillicothe was founded in the early 1880s and developed rapidly after the construction of the Fort Worth and Denver City Railway in 1887. Ed and Will Jones established a store on the west bank of Wanderers Creek and adopted the name of their hometown in Missouri.
Today, Chillicothe is a trading center for ranching and agriculture, as well as oil related business. U.S. 287 runs through the center of town. The town is sometimes called the Iris Village because of the many irises planted around town. The Iris Village Festival is usually celebrated Memorial Day weekend.