Sherman City began with a log store built by E.K. Wood, Giles Gilbert, and Amos Johnson in 1869, and a sawmill in 1870 by John T. Cahoon. Johnson, Cahoon, and others platted Sherman City between 1870 and 1873. Both the township and the city were named for Civil War General William Tecumseh Sherman. An 1878 tornado destroyed much of the town, but an 1879 map shows thirty five structures, including one church. Lumber and shingle manufacturing sustained the economy. When the local forests gave out around 1900, the town went into a decline. One by one the buildings were torn down, the lumber often being reused for new homes or sheds. The last store closed during World War II (1941 ~ 1945).