The Mexico area was settled in the early 1830s by pioneers originally from Virginia, Kentucky, and Tennessee. Mostly of Scottish-Irish ancestry, they had strong ties to the South. As a result, the area is referred to as Little Dixie.

In the spring of 1836, Mexico was selected as the new county seat of Audrain County. In the beginning, we were the home of many prosperous farms, some of which are still in the same families today. Over the years, we established businesses, schools, a hospital, a newspaper, tree-lined neighborhoods, and jobs. Before the popularity of the automobile, we were known as the Saddle Horse Capitol of the World.

There are several theories about how Mexico got its name. One is that because of the controversy between Mexico and the United States concerning the independence of Texas, it was thought the name Mexico would bring prosperity to the town. Another theory is that the town was named because of a tavern sign reading "To Mexico" directing travelers to the Southwest. A third theory is that the Mexico town name came from Missouri's fondness of naming towns for faraway places.