The town of Montgomery was founded in the middle of the Lake Creek Settlement by W. W. Shepperd in July 1837 on 200 acres (0.81 km2) of land that had originally been part of the John Corner League. Shepperd had established the first store in the Lake Creek Settlement in 1835. W. W. Shepperd and his partner John Wyatt Moody named the town Montgomery.
Montgomery became the first county seat of Montgomery County shortly after the county was created on December 14, 1837.
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