Princeton was founded in 1814 and named for Captain William Prince. Prince was an early county commissioner and later served in both the Indiana and Unites States Congress and was a Captain at the Battle of Tippecanoe.
The most noted landmark in Princeton is the Gibson County Courthouse. The courthouse has been featured as a part of the Department 56 Collectible snow village.
Lyles Station located just outside of Princeton was founded in 1849 by freed Tennessee slave Joshua Lyles. Lyles Station served as a stop on the underground railroad which helped escaped slaves in their quest for freedom.
During the American Civil War Camp Gibson was created to train soldiers for the Union cause. The site of Camp Gibson is now occupied by the Gibson County Fairgrounds. The 58th, 65th, and 80th Indiana Infantry regiments were all organized at Camp Gibson. Princeton residents also served in the 17th Indiana Infantry as well as many other units. One, Jacob G. Vail rose to become a Colonel and was brevetted to Brigadier General in the 17th Indiana.
In 1925 half of Princeton was destroyed by the Great Tri-State Tornado. This tornado claimed 70 lives in Indiana of whom more than half were Princeton Residents.
In 1998 Toyota Motor Company opened a truck manufacturing plant (TMMI) in Princeton.