Danbury was not an original colonial grant, but was formed from part of the town of Alexandria to the north. In 1794, a group of Alexandria residents petitioned the state legislature to separate Alexandria into two towns due to the inconvenience of having a mountain divide the town, making it difficult for all the residents to gather in a single place. The petition was granted in 1795, and the lower piece was incorporated as Danbury in that year. The name was suggested by a settler from Danbury, Connecticut. Later more land was added to Danbury from Hill and Wilmot.

In 1800 there were 165 people in Danbury, which on July 10, 1874 was transferred from Grafton County to Merrimack County. Today there are close to 1300 people in Danbury.