When a US post office was established here in 1850, a new name was needed to avoid confusion in mail delivery.

According to the Okolona Area Chamber of Commerce, Colonel Josiah N. Walton, postmaster of nearby Aberdeen, Mississippi, remembered an encounter with a Chickasaw warrior years earlier.

According to another account, Okalona is a Native American placename, possible from the Choctaw, meaning "people gathered together.

"[5] Due to the destruction brought to the area by the Civil War, few structures from the antebellum period remain.

The Elliott-Donaldson House, constructed in 1850, survives and was added to the National Register of Historic Places in 1980.

The Mobile and Ohio Railroad completed its tracks though Okolona in 1859, making the town a center for the ginning of cotton and its shipment to markets.

This is the location of the junction of former U.S. Route 45 Alternate (Church Street) and Mississippi Highway 32 (Monroe Avenue).

As of the 2020 United States Census, there were 2,513 people, 1,164 households, and 645 families residing in the city.

On February 19, 2010, the Mississippi State Board of Education voted unanimously to abolish the school district.

State Superintendent of Education Tom Burnham said the conservator of the district will be Mike Vinson.