New Castle, originally named Fort Casimir, was founded in 1651 by Peter Stuyvesant, who was sent to provide the Dutch with command of all river traffic. Because of its strategic locations, ownership of the settlement was constantly changing. The flags of the Netherlands, Sweden and Great Britain have all flown over New Castle. The three counties which make up the state of Delaware were added to William Penn's lands in America. In 1682, Penn came ashore at New Castle and took possession, but these counties, which were well established, became dissatisfied with Penn's rule. In 1704, when he granted them a separate legislature, New Castle became the colonial capitol of Delaware. The lively town also briefly served as the first state capitol, and continued as the county seat until the 1880's.

New Castle's location made it an ideal transfer point for trips up and down the coast. As a result, New Castle was a thriving community throughout the 1700's and early 1800's. The courts and general assembly also attracted various judges, lawyers and government officials who built handsome houses, many of which still remain. The Great Fire of 1824, which started in the stables behind the Jefferson House, claimed many of the inns and warehouses located on The Strand. Among the building destroyed was the modest home of George Read, signer of the Declaration on Independence and the Constitution.