According to the University of Nebraska-Lincoln, the first settlers of Osceola, which included the families of Reverend James Query and Vinson Perry Davis, arrived in October 1868.

After three years of settlement and disputes over the permanent location, the town itself was organized by frontiersmen William Francis Kimmel and John Hopwood Mickey in the early fall of 1871.

It had been decided in an election by a margin of 14 votes, prior to the formation that the "geographic center of the county" was best suited to be the settlement's site.

During the summer, a post office was built, which served as a terminus between the cities of Lincoln and Ulysses.

In the succeeding year, Nebraska Wesleyan college was founded in the church, serving 11 students by means of 4 instructors.

The Omaha and Republican Valley Railroad, reached the town in 1879 and named a locomotive after the city, however it was ultimately renamed the number "9."

Two years following the arrival of the railroad, the settlement was incorporated as a village on August 26, 1881 after accumulating a population of 200 citizens.

During the final stages in 1895, much of the city was burned by a two-hour-long fire that left only two buildings standing.

Hanna Keelan from Lincoln, Nebraska was responsible for the formation of a comprehensive city plan formulated in 1985.

[4] According to the United States Census Bureau, the city has a total area of 0.92 square miles (2.38 km2), all land.

[6] Using paved roads, Stromsburg and Shelby are tied as the closest cities to Osceola, located approximately 6.8 miles (10.9 km) away.

Outside of the county, Silver Creek is the closest city, found 11 miles (18 km) away.

Precipitation is highest in the late spring and summer months, with an annual average of 28.79 in (731 mm).

The racial makeup of the city was 98.6% White, 0.2% Native American, 0.1% Asian, 0.2% Pacific Islander, and 0.8% from two or more races.

Like most of Polk County, Osceola invests in dairy, cattle and pork production.