Stayton is named after Drury Smith Stayton, one of the town's first settlers, who built a sawmill here in 1870. Historical accounts indicate that Mr. Stayton wanted to name the town "Florence", in honor of his daughter, but the name was already taken (for Post Office purposes) by a town on the Oregon coast. Instead, Mr. Stayton named one of the first platted streets for his daughter.

The original portion of Stayton was platted by Drury Stayton in 1872 and the city was later legally incorporated in 1891. Sources note Stayton's population in 1897 was 300. Just over one hundred years later, in 2000, the population had grown to 6,816. The latest state estimate, at mid-2003, has the number at 7,300 and growing.

Through the early 20th century, Stayton transitioned to more of an agricultural town, becoming known as the "bean capitol of the valley" and featuring a "Bean Festival" each summer. The Stayton Canning Co. Cooperative was established in about 1924 and its processing plant, to this day, remains the largest single employer in Stayton. The Stayton plant remains the flagship of the cooperative, now known as Norpac Foods, Inc.

Also, due to its proximity to the western Cascade foothills, Stayton benefited from the timber industry in the Santiam Canyon. Two notable companies with close ties to Stayton are the Freres Lumber Co. and the Frank Lumber Co. Initially difficult, a decline in the timber industry during the 1980's pushed Stayton toward becoming the diverse economy and community that it is today.