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The area was initially inhabited by the Nipmuck and Mohegan tribes, with the Quinebaug River dividing their territories. As early as 1638, John Winthrop Jr. purchased Tantiusques, a tract for mining lead centered at what is now Leadmine Road in Sturbridge (it was thought at the time that where there was lead, there should be silver nearby). In fact the mineral deposit was graphite which the Winthrops commercialized employing Nipmuck miners.

Southbridge was first settled by Europeans in 1730. In 1801 a poll parish, named the Second Religious Society of Charlton, and popularly called Honest Town, was formed from the west part of Dudley, the southwest part of Charlton and the southeast part of Sturbridge. In 1816 this parish was incorporated to become the township of Southbridge. Among the first settlers was Moses Marcy, who owned a home on the site of what is now Notre Dame church and was elected to Congress, and the Dennison family. Water power from the Quinebaug River made Southbridge a good location for sawmills and gristmills in the 18th century, and textile mills in the 19th century. After the Civil War, many immigrants of Irish and French Canadian descent came to work and live there; by the 1930s they had been joined by Poles, Greeks, Italians and others.

Southbridge has a long history of manufacturing optical products, earning it the unofficial title “Eye of the Commonwealth”, in reference to the Commonwealth of Massachusetts. Under the Wells family, the American Optical Company (“AO”) became the world’s largest manufacturer of ophthalmic products, and at its height employed more than 6,000 people around the world. Many of its workers were exempted from the draft during World War II since they were doing vital defense work, including making Norden bombsights and even some work on the atomic bomb.