The history of Vaughan Woods begins with the first British presence in what is now the Augusta-Hallowell-Gardiner area. On September 23, 1607, Captain Rawleigh Gilbert and nineteen men from the Popham settlement explored the area and interacted with Native Americans before returning to the mouth of the Kennebec. Nearly two decades later, in 1625, Pilgrims from Plymouth Plantation ventured as far as the falls of August in search of trade with Native Americans. With the prospect of lucrative fur trading, the Pilgrims sent a Mr. Allerton to England "to procure a patent for a fitt trading place in ye river Kenebeck..." Allerton returned with a patent and in 1628 the Cushnoc trading post was established a few yards south of the present Fort Western. The patent included about 1,500,000 acres, 145 acres of which are known as Vaughan Woods.

With a decline of trade at Cushnoc, the Plymouth Colony sold the patent in 1661 to John Winslow and three others known as "The Proprietors of the Kennebec Purchase". Six Indian wars between 1675 and 1760 prevented the proprietors from opening the area to settlement, but renewed interest began with a strategy meeting held in Boston in 1749. Subsequent meetings resulted in the construction of Fort Western (1754) and two other forts during the last French and Indian War. After the Peace of Paris in 1763, the Kennebec Valley was secure and settlement commenced.

Settlers Lot #22, which includes Vaughan Woods, was originally owned by Kennebec Proprietor Benjamin Hallowell, for whom the city is named. His son, Brigs Hallowell, settled near the mouth of Vaughan Brook as early as 1768. Several years later, Benjamin Hallowell deeded Lot #22 to his son, and upon his son's death, his wife Eunice conveyed Great Lot #22 to Samuel Vaughan of London, the husband of her sister-in-law Sarah Hallowell Vaughan. The probate proceedings of 1785 led to the Vaughan ownership of the land.

Actual development of the land began in 1793 when the Vaughans completed a gristmill near the mouth of Vaughan Brook. Charles Vaughan, a son of Samuel, was the family agent on Lot #22 and started constructing a house for his brother Benjamin in 1794. Benjamin Vaughan moved into the house, known today as the Homestead, in 1797 and began actively managing Vaughan Woods.

According to a family story, all was well until the mid 1830's when a presidential veto placed the woods in jeopardy. The Vaughans had invested heavily in the Bank of The United States and President Jackson's decision not to renew the bank's charter eventually resulted in great losses for the investors. Benjamin's daughter, Sarah learned of the financial loss while visiting in England and was urged to return home. Upon her return she took the advice of her brother-in-law Judge Emmons and sold large tracts of the woods. In 1840 Sarah sold Vaughan Brook water rights and a tract along the brook to the Kennebec River for commercial development. Two other parcels were sold to the Currier and Rice families. But, the decline of water powered mills and the national economy resulted in the land returning to the Vaughan family in 1930. Shared ownership by the family existed until 1973 when George and Diana Gibson became sole owners by purchase from other family members. In 1991 the Gibsons granted a conservation easement on the Vaughan Woods through the Kennebec Land Trust. This act will prevent future development of the woods and ensure public access.