The Farwell brothers established the XIT on their new land, ultimately employing 800 cowboys, stringing over 6,000 miles of barbed wire, and hiring former Texas Rangers to defeat the hundreds of cattle rustlers operating across the state line in the New Mexico territory.

When the cow camp that would become Farwell was established is not documented, but when Parmer County was created in 1907 (previously part of Deaf Smith County to its north), the election was held for county seat in a contest among Farwell, Bovina, Parmerton, and Friona, all to Farwell's northeast, all which had started as cow camps, but had varying success thus far in attracting settlers who ran saloons, stores, stables, and other services for the cowboys.

Parmerton was initially voted county seat that year, and a one-story courthouse was built there.

Cowboys, who were the largest demographic, lived in their saddles and sleeping bags most of the time, with no fixed address.

When the decision was made to begin selling off the XIT to settlers, they would arrive in Farwell on the railroad, which had reached there in 1899, linking rail to the east with rail to the west of the Rockies Mountains via the track laid between Farwell and Belen, New Mexico.

Many of the families then traveled to Farwell and the rest of the region in covered wagons and established their homes in dugouts in the prairie soil (no stone or trees indigenous to the area were available for construction).

Dry-land farming and herding were always risky, but families persevered year by year, often relying entirely on their small windmill pumping enough water for the home, a milk cow, some chickens, a few fruit trees, and vegetable gardens when crops and cattle withered during droughts and wind storms.

[8] According to the United States Census Bureau, the city has a total area of 0.8 square miles (2.1 km2), all land.

The straight north–south border between the two states was originally defined as the 103rd meridian, but the 1859 survey that was supposed to mark that boundary mistakenly set the border between 2.29 and 3.77 miles too far west of that line, making the current towns of Texline, Farwell, Bledsoe, Bronco and a part of Glenrio appear to be within Texas.

The disputed strip, hundreds of miles long, includes parts of valuable oilfields of the Permian Basin.