Sunset is on a spur of State Highway 101 at the western end of Farm Road 1749, fifteen miles south of Montague in southern Montague County. A Butterfield Overland Mail station was located two miles from the present townsite. The first settlers came from Denton County in 1870. Sam Smith opened a grocery store in the 1870s and in 1880 applied for a post office under the name Smithville. The name was already taken, however, and postal authorities suggested the name Sunset. Two years later the Fort Worth and Denver Railway built through the community. Residents of nearby Pella left their settlement and moved to Sunset to be near the tracks. On July 26, 1884, residents voted to incorporate, although the corporation did not last long. By 1900 the estimated number of residents had surpassed 600. A canning factory, a weekly newspaper, the Sunset Signal, two churches, a school, a gristmill, cotton gins, and two banks served the community and area farmers. Before 1900 Sunset was in Wise County due to a surveying error; that year a lawsuit awarded land including the site of Sunset to Montague County. Sunset remained a thriving market center for the first four decades of the twentieth century. The Great Depression, World War II, the mechanization of farming, and a decline in the size and number of ranches contributed to a decline in businesses and population. In the late 1950s Sunset had 260 residents and eight businesses. Those figures decreased to 200 residents and four businesses by the late 1980s. In 1990 the population was 200. The population was 339 in 2000.