Settlers had come to this community by 1889, when it was known as Bennett and supported by farming. In 1891, John E. Loxley of Michigan opened a lumber mill called Bennett Mill, and the settlement was later renamed Loxley in honor of the timber merchant. Around 1900, the Loxley Hotel was built to house travelers along the stage route through town. In 1905, the L&N Railroad ran a line through Loxley with a depot, giving farmers a route to market their produce and providing easy access to the hotel along the old stage trail. Loxley's first schoolhouse was built in 1908, and students traveled by train to Bay Minette to complete high school on the Pine Knot Special, an engine fired by pine knots gathered along the way. The depot burned in 1965, ending Loxley's railroad era. Modern development began in 1913 when Robert M. Mahler of Chicago purchased 2300 acres in the area and promoted the town, encouraging good roads, donating many miles of land for present roadways, and assisting with other public projects. Saint Raphael's Catholic Church, built in 1916 of locally manufactured brownstone, now houses the Loxley Library and, along with the Loxley Hotel, is one of the few surviving structures from the early 1900s. Loxley was incorporated in 1957 and became known as the biggest little town in Baldwin County. Many recent improvements are credited to lifelong resident and seven-term mayor Billy Middleton, a Marine Corps veteran and civic leader who served the community for more than 31 years from 1988 to 2019.