John Murray, one of the proprietors of the land, chose the name which traditionally was believed to mean "New Ireland" although some, including historian James E. Fraser, dispute this definition.

By 1791, Athol had four gristmills, six sawmills, a fulling mill, and a shop with a trip hammer, all of which were operated by water power.

As industries developed along the river valley, homes and stores grew up around the common located on the hill southeast of the factories.

Because of its development of industry, commerce, and transportation, Athol was the center of activity for the entire area at the start of the 20th century.

During the 1930s, the trolley lines closed due to the increased use of private automobiles, bus service, and the generally difficult economic times.

When four Swift River Valley towns were flooded to create the Quabbin Reservoir, the Springfield railroad route had to be abandoned.

It is bordered by Royalston to the north, Phillipston to the east, Petersham to the south, New Salem to the southwest, and Orange to the west.

During the early part of the 20th century, local water power and rail service attracted manufacturers such as Union Twist Drill and the L. S. Starrett Company to the area, leading to Athol's nickname "Tool Town".

The Millers River Community Development Corporation, North Quabbin Housing Partnership, and a banking alliance also grew out of collaborative efforts.

These groups succeeded in financing housing for middle-income residents, natives, and others who were not accepted by traditional lending programs.

Small cities grants and other government funding provided a promising start of economic growth until a recession hit In the 1990s, a Walmart opened in Orange close to the town line of Athol.

There was also industrial development, with a portion of the former Union Twist Drill mill undergoing conversion for use by Massgrow as a marijuana-growing facility.

High speed Internet is available in selected areas of town through Road Runner (Time Warner), Verizon and other vendors.

Though residents can often walk to businesses in the downtown and uptown districts, Athol is primarily dependent on the automobile for out-of-town transportation.

The Franklin Regional Transit Authority (FRTA), based in Greenfield, has daily runs from Athol to points west.

The Montachusett Area Regional Transit (MART), based in Fitchburg, can take residents to points east of town.

The town still has its old train station downtown (the depot), along the Pan Am Railways freight main, formerly a part of the Vermont and Massachusetts Railroad.

A proposal known as "Northern Tier Passenger Rail" is in the early stages of planning, and would extend MBTA's Fitchburg Line westward through Athol and Greenfield, terminating at North Adams.

Programs leading to bachelor's degrees and higher courses of study can be found in Amherst, Fitchburg, Worcester, and Keene.

Private day care centers and nursery schools provide stimulation and social learning opportunities for the young child.

The Athol Area YMCA also schedules activities appropriate for children ages 6 months through kindergarten, and has a preschool and nursery school, as well as after-school daycare.

Athol is geographically isolated from the major cultural centers of Massachusetts; consequently, its residents tend to create their own entertainment.

The library has a Teen Advisory Council called ATAC who work with the young-adult librarian to provide weekly programs for young adults.

Thousands of spectators line the banks of the Millers River to watch 300 plus canoes race from Athol to Orange.

Joshua Lamarche, director of Osprey Entertainment, also manages concerts called Rockathons for the metal/death metal crowd, which are well received.

The Athol Historical Society, a group of private citizens, occupies the old town hall in the uptown area.

Additionally, the society sponsors talks about local history, provides guided tours of historic sites, and holds special events.

The Alan E. Rich Environmental Park, dedicated to a beloved deceased Selectman, sits proudly near the Millers River bridge on Main Street and provides habitat for native plants.

The southern part of Athol, bordered by the Harvard Forest and the Quabbin Reservoir, offers some of the most beautiful hiking trails in the area.

The downtown Athol Area YMCA includes a 4-lane 25 yard pool,[20] full size gym, workout equipment and group exercise program.