The town sits in the valley of the Piscataquis, Sebec and Pleasant Rivers in the foothills of the Longfellow Mountains and is the gateway to many pristine hunting, fishing, hiking, boating, and other outdoor tourist locations such as Schoodic, Seboeis, and Sebec Lakes, Mount Katahdin and its backcountry in Baxter State Park and the Katahdin Woods and Waters National Monument, Katahdin Iron Works and Gulf Hagas.

[3] It would become a trade center, with Trafton's Falls providing water power for early industry.

The Joseph Cushing & Company built a woolen textile mill in 1842, but it burned six years later.

[4] The Bangor and Piscataquis Railroad arrived in 1868–1869,[5] and Milo developed into a small mill town.

The American Thread Company built a factory with a narrow gauge industrial railway in 1901–1902, moving its equipment from Willimantic, Connecticut.

In 1906 the railroad invested $414,448.95 in brick buildings including a two-story office, a planing mill, and an enginehouse with a 242-foot (74 m) locomotive shop and a 54,000-square-foot car shop connected by a 75-foot (23 m) transfer table moving 369 feet (112 m) back and forth above a repair pit.

Employee housing initially included a 45-room hotel with a dining room for single railroad shopmen and 46 homes with bathrooms, hot water boilers, ranges, and electric lights for married men.

[7] The village expanded to include stores and 72 identical employee houses arranged in four rows along First and Second Streets.

[8] On Labor Day 1923, Milo became the site of the Ku Klux Klan's first daylight parade in the northern United States.

[9] On September 14, 2008, a fire destroyed several buildings in downtown Milo, including a flower shop, an arcade, and a True Value hardware store.

Because of the age, composition, and vicinity of these buildings, the fire easily spread and devastated much of Main Street.

This climatic region is typified by large seasonal temperature differences, with warm to hot summers and cold winters.