Founded in 1901, Garwood stands on land once occupied by Preston Gilbert, one of Stephen F. Austin's Old 300 colonists, who acquired the acreage in 1827. In 1896, Marcus Hervy Townsend, Thomas A. Hill, and William Thomas Burford bought part of Gilbert's original league of land as a farming and ranching investment. By 1901, they had begun rice production, developed a canal and irrigation system, and platted a townsite on their land. Townsend was a lawyer and Texas legislator, Hill a prominent merchant and banker, and Burford a druggist and planter who served as Colorado County Sheriff from 1898 to 1902. They named the town for Judge Hiram Morgan Garwood, a friend of Townsend who never lived in Garwood or in Colorado County. Streets and avenues were named for early area settlers, other friends of the founders, and the founders themselves. From its inception, the town's economy has been based on rice production, with gravel, oil and gas, and duck and goose hunting also important businesses, and throughout its history the small community has been an important part of Colorado County's heritage.