The building of a town on the location of Waterville was conceived by A.T. Greene, who is known as the "Father of Waterville." Mr. Greene relinquished one forty acre tract and he and surveyor J.M. Snow platted the town site. The town was named Waterville in consideration of the plentiful well in sharp contrast to the dry wells in Okanogan.

Boasting their "barrel of water", Waterville won county seat honors in the election of 1886 by a 56 vote majority. On May 2, 1887, the county commissioners officially declared Waterville the new county seat. In December of 1887, a post office was secured for Waterville and A.T. Greene was named postmaster. By the spring of 1888, eight buildings could be found on the town site. A.T. Greene built the original Douglas County Courthouse in September 1889 at a total itemized cost of $4,046.70.

The citizens of Waterville petitioned for incorporation under the District Court of Washington Territory, Fourth Judicial District in the fall of 1888. On March 22, 1889, the petition was granted. Washington became the 42nd State on November 11, 1889. On April 4, 1890, a petition was signed by thirty residents asking for a special town election to vote on the proposition of the Town of Waterville being organized and incorporated under the general laws of the state. The election was held on May 3, 1890 and although the vote was light, there was no opposition. Waterville was now a legal incorporated town under state law.

It was 1892 before water was turned into the town's mains for the first time. Waterville had lived up to its name and supplied ample water for its population which at the time was between 350 and 500 people.