Like many northwest Florida communities, Paxton can trace its name and founding to the timber industry around the turn of the century. But even before the first pine tree had been logged, Paxton had a share of settlers.

Paxton's natural landmark was a mile-wide lake the Creek Indians called Big Pond. The lake was a stopping place on the Creek's Red Ground Trail which ran from central Alabama to Escambia Bay.

The Paxton area began to be settled by Europeans in the late 1830's after the war between immigrants and the Creeks, which saw many of the Creeks captured and sent to Oklahoma.

Paxton and neighboring Florala and Lakewood, began to boom when the timber industry started cutting the inland forests of Northwest Florida and South Alabama. By then, Big Pond had been renamed Lake Jackson in honor of the general and later president, Andrew Jackson.

By 1903 the Florala Sawmill Company opened a timbermill on the south side of Lake Jackson. Tom Hughes, who started the sawmill company, named his first mill after an invester from Chicago, John Paxton.