The Kent County side of Milford was first settled in 1680 by Henry Bowan on what was known as the Saw Mill Range. A century later the Reverend Sydenham Thorne built a dam across the Mispillion River to generate power for his gristmill and sawmill. Around the same time, Joseph Oliver laid out the first city streets and plots nearby on a part of his plantation. Soon a number of homes and businesses appeared along Front Street and Milford was born. The city was incorporated February 5, 1807.
In the 1770s, a ship building industry was already flourishing on the Mispillion River. Shipbuilding continued to be the major industry of Milford through World War I, bringing considerable prosperity to the town. The high point came in 1917 when the four-masted, 174-foot (53 m) long Albert F. Paul was launched from the William G. Abbott shipyard. At one point six shipyards were operating in the downtown area. When the last of the area’s giant white oaks was cut in the 1920s, the shipyards quickly went out of business, although the Mispillion ships sailed on for many years. (The Paul was sunk by a German torpedo in 1942 while sailing from the Bahamas.) The Vineyard shipyard was called into service in both World War I and II to build submarine chasers.
During much of the twentieth century Milford served primarily as the commercial center for much of southern Delaware's large agricultural community.
Seven of Delaware's governors came from Milford: Daniel Rogers
(who served 1797-99), Joseph Haslet
(1811–14), William Tharp
(1847–1851), Peter F. Causey
(1855–59), William Burton
(1859–63), William T. Watson
(1895–97) and Ruth Ann Minner