Magnolia is on the Missouri Pacific line at the junction of Farm roads 1774 and 1488, twenty miles southwest of Conroe in southwestern Montgomery County. It was first settled in the late 1840s and named Mink's Prairie for one of the early settlers; its name had been shortened to Mink by 1850. On September 3, 1885, a post office was established at Mink with John F. Dobbs as postmaster. The community's population was twenty-five by 1900. In 1902, when the International-Great Northern Railroad built a line through the area, the town moved to its present location. The railroad named it Melton, in honor of Jim Melton, a large landowner in the county, but the United States Post Office confused it with Milton. Consequently it was renamed Magnolia for the magnolia trees in the bottoms of adjacent Mill Creek and granted a post office in 1903.
By 1915 Magnolia had a population of 150 and telephone service, a sawmill, Baptist and Methodist churches, two general stores, a physician, a railroad and express agent, a hotel, a livery and real estate office, a cattle dealer, a druggist, a confectionery, a cotton gin, and a blacksmith. By the 1940s the Magnolia oilfield had been established a mile east of town, and the community's population had increased to 400. At this time Magnolia had a station on the International-Great Northern Railroad, a post office, a cemetery, two churches, two schools, ten businesses, and forty-five dwellings. The Grogan-Cochran lumber camp was located two miles southeast of town.
By 1962 the Missouri Pacific had taken over the railroad line, and Magnolia had two high schools, a church, a landing field, and a small collection of dwellings within several miles of the town center. Magnolia was incorporated on September 28, 1968. Its population grew in the 1960s and early 1970s, reaching 1,150 by 1971. By 1980 its population had declined to 867, but by 1989 it had grown to 1,132, and the town had 124 businesses. By 1990 the population of Magnolia had declined again to 940. The population grew to 1,111 by 2000 with 640 businesses.