Originally known as Cow Hill, the town was established in 1872 by merchant William Jernigin between the Middle and South Sulphur rivers on the rich, black gumbo prairie in northeast Hunt County. The town was incorporated in 1885, and nine years later, East Texas Normal College moved here from Cooper after the original school burned—today, the school is known as Texas A&M University–Commerce.

Commerce was named the "Bois d'arc Capital of Texas" by the Texas Legislature because of its location in the geographic center of the indigenous range of the bois d'arc tree. The second-largest bois d'arc tree in Texas—"Big Max," recognized by the National Forests Famous and Historic Trees—is within the city limits. In September, the Bois d'Arc Bash celebrates these trees.

The square and downtown are lined with lampposts, benches, live oak trees and colorful plants, with antique brick streets completing the historic setting. The Westside Barber Shop, established in 1886, offers a glimpse of barbering in the early days.