The Lenni-Lenape Indians were the first residents of the area. Martine Avenue was the old Indian Trail. Fanwood was once part of Westfield, as was Scotch Plains.
Like many Central Jersey communities, Fanwood was built along the railroad lines of the Central Railroad of New Jersey, and the first homes in the borough were clustered around the train station, which as the time was located east of Martine Avenue.
Once a summer vacation spot for well-to-do city dwellers, Fanwood borough has evolved into an attractive suburban community and a "great place to raise kids". The borough was originally settled by vacationers who were attracted to the area by its "wide open space and clean air". The 1.3 square-mile borough was carved out of the Township of Fanwood in 1895. To make the commute to the city easier, the early developers placed the railroad station in the center of the borough, ensuring that it was no farther than a half mile from any part of town.
The borough owes its name to the railroad. The first president of the railroad named the train station Fanwood in honor of Fanny Wood, the daughter of a railroad official and an author who wrote articles highlighting the beauty of the Central Jersey region. The original railroad station, a stone Victorian structure, stands today as testimony to the borough's beginnings. It serves as Fanwood's community center where many meetings are held. Fanwood is still an important commuter town, and many residents use the train to get to their jobs in Newark and New York City. The train ride to NYC is approximately 45 minutes.
Another piece of the past still stands on the grounds of Borough Hall, which is located on the former site of a luxurious summer hotel.
Although the mansion was torn down many years ago, a carriage house remains and is used by a local theater group which puts on four productions a year.
There is not much room for new residential or commercial development in the borough. In 1988, The borough applied to the Coalition of Affordable Housing to be classified as a fully-developed town in order to reduce its low-and-moderate income housing needs from 87 to zero.
Fanwood grew like mad during the 50s and 60s and as of June, 1996 there were 7,115 residents.