It was founded in the early 1880s and developed rapidly after the construction of the Fort Worth and Denver City Railway in 1887.

The community, named by A. E. Jones for his hometown in Missouri, grew up on Wanderer's Creek near the headquarters of W. H. Worsham's R2 Ranch in the 1870s.

A fire destroyed the town in 1890, and citizens rebuilt south of the rail line rather than north.

Additional rail service from the Kansas City, Mexico and Orient Railway began in 1908.

Chillicothe is located in eastern Hardeman County and US 287 runs through the center of town, leading southeast 16 miles (26 km) to Vernon and west 13 miles (21 km) to Quanah, the Hardeman county seat.

According to the United States Census Bureau, the city has a total area of 1.0 square mile (2.6 km2), all land.

[6] Wanderers Creek runs past the western side of the city, flowing north towards the Red River at the Oklahoma state line.