Montgomery Borough stands at the edge of the Black Hole Valley beneath Penny Hill, in an area where Black Hole Creek meets the West Branch of the Susquehanna River. Native peoples including the Susquehannock originally lived here, and in the early eighteenth century the Lenape replaced them; a native village is believed to have stood along Black Hole Creek near Brook Street. One of the first European settlers in the Black Hole Valley was Cornelius Lowe, who moved here in 1778, but because of the Big Runaway, when Loyalists and their Native allies drove pioneer families from the North and West Branches of the Susquehanna Valley, permanent settlement did not occur until after the Revolutionary War. In 1783, the year the Revolution ended, John Lawson began farming the area where the borough now lies, and in 1784 Nicolas Shaffer built the first grist mill on Black Hole Creek, whose waters powered several mills over the years. The area was originally within Washington Township in Northumberland County and later became part of Clinton Township, Lycoming County, in 1825. Over time it was known as Black Hole, Clinton Mills, and Clintonville. In 1856 Robert Montgomery established a tavern at the corner of Montgomery and Main Streets, and when the Philadelphia and Erie later Pennsylvania Rail Road came through, he donated land for the first train station, leading the place to be named Montgomery Station in his honor. Much of what is now the borough remained farmland through most of the nineteenth century, and only after local factories expanded and worker housing increased did residents choose to form an independent town, incorporating the borough of Montgomery on March 27, 1887.