Scotland is on U.S. Highway 281 just south of the Little Wichita River, seventeen miles south of Wichita Falls in eastern Archer County. It began as a German Catholic farming community on land once part of the O Circle Ikard Ranch. Scotland was named for Henry J. Scott of Toronto, Canada, who bought land and established the town about 1907 through his agent, J. H. Meurer, of Bastrop. Many of the early settlers came from Central and South Texas, and Meurer is said to have traveled to Galveston to recruit newly arrived German immigrants. The first train arrived in Scotland on July 21, 1908, as the Southwestern Railway built west from Henrietta. A post office opened in the first general store in 1908, and a school began about 1909. In 1910 Scotland was described as "a thriving community" of 600 people. The railroad had reached Archer City to the west that year, and the town was shipping grain and cotton. By 1915 Scotland had St. Boniface Church, a Knights of Columbus hall, two more general stores, a bank, a cattle breeder, a gin, two lumber companies, a real estate office, a hotel, a physician, and a confectioner named Hesse.
The Southwestern abandoned its twenty-nine miles of track between Henrietta and Archer City by 1920, and Scotland began declining. The oil discoveries of the 1920s in the surrounding areas seem to have affected Scotland little, although the town built a four-classroom school with an auditorium in 1922. The population in 1925 was estimated at just 316, where it remained for two decades. In 1929 Scotland was said to be generally occupied in farming, dairying, and poultry raising. Since the opening of a good road to Wichita Falls, the number of businesses had declined. By 1950 the estimated population had dropped to 250, and there were eight businesses. In 1952 the school closed. In 1965, when construction began on Lake Arrowhead, Scotland had one business and 350 people. The huge lake built on the Little Wichita River is owned by Wichita Falls and provides that city's water supply. The lake also provided an immediate boost for Scotland, as the town is located on its shore. By 1970 Scotland had an estimated population of 145 and six businesses. The town incorporated in 1976, and the population had reached 333 by the 1980 census. In 1986 Scotland had a post office and three businesses. By 1990 the population was 490, and Scotland had spread into Clay County. The population was 438 in 2000.