Newtown was founded by William Penn in 1684. Newtown was one of several towns that Penn had organized around Philadelphia to provide country homes for city residents and to support farming communities. It was the county seat of Bucks County from 1726 until 1813, when it was replaced by a more central Doylestown. After his December 26, 1776 morning march to Trenton, and before the Battle of Princeton, General George Washington made his headquarters in Newtown. Newtown was incorporated on April 16, 1838 and has been enlarged three times since. In 1969 Newtown's entire central business district was placed on the National Register of Historic Places. This designation was largely due to Newtown's historic clock tower. Newtown is enhanced by unique boutiques, colleges, cuisine, a climate for industry, Pennsylvania’s most popular state park (Tyler State Park) and a Heritage Walk that traces the very steps of George Washington. The Law School Admission Council is headquartered in Newtown Township. As a result, many American lawyers have heard of Newtown. The oldest operating movie theater in America is Newtown Theatre at 120 North State Street.
Newtown is known for its wealth of history. One of the most noted former residents of Newtown was painter Edward Hicks (1780–1849). He lived in Newtown for over forty years with his family, where he was able to own his own business. Newtown has an established historical society called the Newtown Historical Association.The Newtown Hardware House has been in continuous operation since 1869, which ranks as the longest tenure for any single business in Newtown.