Payne Spring is on State Highway 198 east of the Cedar Creek Reservoir and fifteen miles northwest of Athens in northwest Henderson County. It was named for William K. Payne, a Confederate veteran and delegate of the Texas secession convention, who settled in the area in 1850, and served in Company E of the Thirteenth Texas Cavalry. By 1888 the community had a Methodist church, a Baptist church, a blacksmith, a general store, and a gristmill and gin. When the post office was established in 1890 the area was known as Payne's Spring. The name was changed in 1894 to Payne Spring, and the post office continued to operate until 1905. By the 1940s Payne Spring had a population of sixty-eight and one business. The population in 1990 was estimated at 606.