Pottsboro is on Farm Road 120 eight miles northwest of Sherman in north central Grayson County. It was established in 1876 by James A. Potts, a pioneer settler who donated land for a town and a right-of-way so that the Missouri, Kansas and Texas would extend its tracks westward from Denison to his settlement. The community, no doubt aided by its status as a stop on the railroad, grew rapidly for the rest of the 1800s. It incorporated in 1880, and by 1885 its population had reached 200 and it supported a cotton gin, several gristmills, and a number of churches. A post office opened there in 1891. The population reached 454 in 1920 and 500 in 1925. By that time the community was served by some twenty-five businesses, including a bank, and by two schools with a combined enrollment of 300 students. Pottsboro declined to a population of 358 by 1936 and 312 by the mid-1940s. It then grew to 383 by 1957. The number of businesses had fallen to twelve by 1948, though by the late 1950s it was back up to more than twenty. The town began to grow again during the 1950s, perhaps spurred by the rapid expansion of nearby Denison. By 1967 Pottsboro reported thirty businesses and a population of 750, and by 1990 its population was 1,177. The population grew to 1,579 in 2000.