Originally part of Derby, Oxford was settled by people moving inland from Derby, Stratford, and New Haven. Land was acquired in five purchases from the Paugussett and Pootatuck Indians. The first grant of settlement appears in Derby records of 1678. Bounds were set with Mattatuck, now Waterbury, in 1680.
In 1741, the "Oxford District" was made a parish but did not become a separate town until 1798. Oxford long remained rural with grist and saw mills, wool growing, and coastal commerce via Derby and New Haven until the embargo of 1807. Many small farm industries flourished until mid-century, when the railroad in the Naugatuck Valley caused sweeping changes. With dwindling population, Oxford turned to poultry and dairy farming, which later declined as new highways provided better access to employment in neighboring towns.