Pepperell was first settled in 1720 as a part of Groton, and was officially set off and incorporated in 1775. The founders named the town after Sir William Pepperell. It was noted for its good soil and orchards. By 1837, when the population was 1,586, Pepperell had three paper mills. It also produced palm leaf hats, boots and shoes.
The well-known Chester H. Waterous Bridge was, until recently, the only covered bridge in the state still open to vehicular traffic. The bridge was closed to vehicles on April 7, 2008 and demolition began on July 30, 2008. For two years a new covered bridge was constructed, which opened July 30, 2010.