According to the United States Census Bureau, Pottsboro has a total area of 2.9 square miles (7.4 km2), all land.

[5] Pottsboro was established in 1876 by James A. Potts, a pioneer settler who donated land for a town and a right-of-way so the Missouri–Kansas–Texas Railroad would extend its tracks westward from Denison to his settlement.

Pottsboro suffered devastating fires that destroyed a great deal of the business section of the town: 1890, 1902, 1923, and 1924.

Potts, Judge James G. Thompson, applied for a post office in 1891, when they responded, the "ugh" was dropped from the name by the federal government, and the town's name finally became "Pottsboro".

By that time, the community was served by some 25 businesses, including a bank, and by two schools with a combined enrollment of 300 students.