First settled in 1719, the town suffered repeated Indian attacks with the last death from Indian warfare recorded in 1724. There were about 1,000 people in town in 1765 when a disastrous epidemic of dysentery killed 60 children of the town. The early economy included agriculture and grazing. The first gristmill was built on Mill Brook in 1719 and the town was the one of the earliest in the county to establish a subscription library, before 1796.

Three small villages grew up around the water powered mills of the town by 1830 and there was small-scale production of chairs, carriages, and woodenware. A tannery was opened in the 1840's to supply local boot and shoe makers and palm leaf hats were produced in quantity. The town's fresh air and still rural environment drew increasing numbers of visitors and Rutland became a minor recreational and health resort in the 1880's. In 1883 Muschapogue House hotel was built. This development was followed by the building in 1898 of the Massachusetts Hospital for Consumptive and Tubercular Patients, a state prison camp and hospital as well as the opening of a handful of small private TB sanitoria. 

Rutland Massachusetts is located in Central Massachusetts, bordered by Princeton on the northeast, Holden on the east, Paxton on the southeast, Oakham on the southwest, and Barre and Hubbardston on the northwest. Rutland is about 13 miles northwest of Worcester, 52 miles west of Boston.