According to the U.S. Census Bureau, Hudson has a total area of 0.82 square miles (2.12 km2), all land.

It was one of eight towns founded in McLean County during the great real estate boom that swept through central Illinois between 1835 and 1837.

[7] Hudson was created by the Illinois Land Association, who developed it as what was then called a colony.

Such colonial developments do not imply that the group had any common social or religious agenda.

Each participant would contribute $235 to the common pool and would receive four kinds of property: three lots in the main part of the town; one out lot (see below); 160 acres (650,000 m2) of prairie land for farming; and 20 acres (81,000 m2) of timber for fences, firewood, and building material.

The association also anticipated a profit from the sale of untaken land, which would be shared among the participants.

These were surrounded by a ring of "out lots", which were slightly larger, but still part of the original town plan.

The tradition of in and out lots goes back for centuries in New England, where farmers were reluctant to consign their livestock to locations far removed from the town center.

In 1837 the land market turned sour, settlement slowed, and Illinois sank into a deep depression.

Business increased, many unoccupied lots were taken up, and a new commercial district developed along what had been "out-lots" along the west side of the town facing the railroad.

Early in its history, Hudson, following an ancient New England custom, had created the office of village herdsman.

The surrounding tallgrass prairie proved to be some of the most fertile agricultural land in the world.

Initially the crops were corn and oats, produced together with a great deal of livestock.

By the mid-twentieth century livestock production had slowly begun to decline and soybeans had replaced oats as a second crop, but the great fertility of the soil remained.

[19] In the late twentieth century, because of its proximity to Bloomington and Normal, Hudson was becoming increasingly popular as a residential community.