The town was originally named Marysville after the wives of the two founders, John Smith and Isaac Meneley, who started businesses here circa 1840.

[5] Potomac prospered into the late 20th century, with a population peaking at 900 during the 1970 census, due in part to its location along US Route 136, one of the primary East-West highways crossing the state of Illinois.

The opening of Interstate 74 reduced the amount of travel through Potomac, leading to a rapid decline in the number of service stations, restaurants and small businesses in the downtown area in the early 1970s.

In the early 1990s a fire destroyed several downtown buildings on the north side of Route 136, dramatically altering the appearance of the community.

[7] Hugh M. Luckey (1873–1946), farmer and Illinois state legislator, was born near Potomac, on a farm.

[8] Potomac is located approximately 18 miles northwest of the county seat of Danville.