In April 1903, Cottonwood was incorporated, becoming the first town established in Houston County. Its name may have come either from Mr. Wood, an influential landowner, or from the softwood trees growing in the area. General stores, a bank, and mills including turpentine, grist, and timber operations sprang up, and at least two lumber companies built logging railroads through town. One of those lines remained in service into the 1940s as a freight route from the Cowarts area to Bascom, Florida. In the early 1920s, efforts to drill for crude oil in the area found only a hot mineral water spring. Mr. J. R. Sealy turned that discovery into an internationally known health spa, and the Sealy Hot Mineral Springs remained in business until a fire destroyed it in 2001. At the 2000 census, Cottonwood had a population of 1,170.