Southmayd is on State Highway 56 seven miles west of Sherman in central Grayson County. It developed when the tracks of the Texas and Pacific Railway crossed land granted to D. S. Southmayd, from whom the community derives its name. The presence of the railroad attracted settlers, and by 1881 the settlement's first business, a general merchandise store, was built, and a post office began operations. From 1904 to 1926 Southmayd had a population reported at 132, which increased to 250 by the mid-1930s. By 1936 it had nine businesses. During the mid-1970s the population fell to 235 and the town had no businesses. In 1989 Southmayd had a population of 348 and two businesses. In 1990 the population was 643. The population increased to 992 in 2000.