Graham is at the intersection of U.S. Highway 380 and State highways 16 and 67, in southeastern Young County. The site was first settled in 1871 by Gustavus A. and Edwin S. Graham, who gave their name to the townsite. The Grahams moved from Kentucky to Texas after the Civil War and purchased 125,000 acres in Young County. The population of the county had dropped considerably during the war, and the Graham brothers helped to revive the area. After the brothers purchased a saltworks in 1872, Gustavus Graham surveyed the townsite. The Wilsons, the first family to settle after the arrival of the Graham brothers, started the first store, and the Grahams promoted the sale of lots near the north line of the former Brazos Indian Reservation. The post office opened in 1873, and Graham won an election over Belknap to become the county seat in 1874, after the county's reorganization. The county used vacant rooms and small buildings for court days until a frame two-story structure was built on the west side of the square in 1876. In 1884 a fine three-story limestone building was built. The east door of the 1884 building still stands in the middle of the square. The present courthouse was begun in the early 1930s, and the old courthouse was razed in 1932.
J. W. Graves started the Graham Leader in 1876, a year before the Cattle Raisers Association (now the Texas and Southwestern Cattle Raisers Association) was organized in Graham. J. E. Dowdle operated a combination gristmill and sawmill and a cotton gin. Other early businesses included a saltworks, a brick kiln, two hotels, and several stores. Dr. J. E. Ryus built a large two-story brick building on the west side of the square in 1879 to house his drugstore and the Federal District Court in the upper story. The federal court was moved to Abilene in 1896. Graham was incorporated sometime before 1900. In 1903 service of the Chicago, Rock Island and Texas line from Fort Worth began, and in the 1920s Graham was connected to Breckenridge, Ranger, and Dublin by the Wichita Falls and Southern line. In the 1920s Lake Eddleman was constructed in the hills north of town to provide water and recreational opportunities. The municipal airport dates from 1929.
The population of Graham was reported as 576 in 1880, 667 in 1890, and 878 in 1900. More significant growth followed the discovery of oil in 1917, and by 1920 the population was 2,544. Subsequent oil discoveries and related activities pushed the population to 5,175 in 1940 and 6,756 in 1950. By 1966 Graham had seventeen churches, seven school buildings, a hospital, a radio station, two libraries, three parks, and two newspapers (the Leader and the Newsfoto, which later became the Graham News). Lake Graham, dammed in 1958, joined Lake Eddleman around 1959, and the city water plant was expanded several times. In 1986 a new water plant was opened on Lake Graham. Among the leading industries of Graham in the 1980s were tourism, oil services, livestock-feed manufacture, and the production of electricity, magnetic tape, and fiberglass and aluminum aerospace equipment. Extensions of Ranger and Cisco junior colleges provided higher education. The population of Graham was 8,505 in 1960, 7,477 in 1970, and 9,170 in 1980. The estimated 1990 census was 8,986. In 2000 the population dropped to 8,716. There were several Texas Historical Commission markers in and around Graham.