Malone is on State Highway 171 and Farm Road 308, fifteen miles southeast of Hillsboro in southeastern Hill County. Alonzo Dru Walling, a pioneer settler, laid off a townsite, named after himself, in 1884 or 1885. This community moved two miles eastward in 1902 so that it might become a stop on the International-Great Northern Railroad, which had recently extended its tracks through the area. In 1903 the Trinity and Brazos Valley Railway extended its tracks from east to west across the county, intending to intersect the I-GN tracks at Walling. A. D. Walling, seeing the economic potential of a community served by two railroads, overcame the hostility of William Malone, president of the I-GN, toward a competing rail line in the area by suggesting the establishment of a new town, which would allow Malone's line to maintain its control of rail traffic in Walling. The new settlement, where the two lines would intersect, was to be called Malone and was located on farmland owned by A. D. Walling, just west of the town that bore his name. Walling and a few other investors surveyed the new community and divided it into lots, which were sold at public auction on December 2, 1903. Officials of both the I-GN and the T&BV lines were given an interest in the sale of property in Malone, and directors of the latter line agreed to build a station there.
The new community grew immediately, its population standing at 125 on the day of the public auction. In addition, a cotton gin, a lumberyard, and a school already operated there. A post office opened that year. A. D. Walling ensured the growth of Malone through litigation that forced officials of the International-Great Northern to build a station and schedule regular stops in the new community. While the development of Malone was assured, the decline of Walling was made equally certain by these actions. A. D. Walling built and owned most of the commercial buildings in Malone, and by 1913 the settlement was "really a live little town." Served by two railroads, the new incorporated town had thirty businesses, including eight grocery stores, two banks, four cotton gins, and two hotels. By the mid-1920s it had a population of 550 and thirty-five businesses. Its high school and elementary school enrolled 400 students. After the 1930s Malone declined less than many similarly sized towns, from 481 and twenty-nine businesses in 1936 to 429 and twelve businesses by 1948. By the mid-1950s, however, the cumulative effects of economic depression, world war, urbanization, and the decline of rail traffic reduced the town to 352 residents and twelve businesses. Ten years later Malone had 255 residents and fifteen businesses. After the 1960s the town began to grow again, perhaps due to its proximity to Navarro Mills Reservoir. By 1976 it had a population of 305 and seven businesses. In 1990 it had 306 residents and four businesses. The population reached 278 with fifteen business in 2000.